Data from the Bureau for Labor Statistics show that
people of all income levels tend to spend similar percentages of their budgets on each expenditure category, with some exceptions.
For example, as income rises, Consumer Units (defined as families living
together, financially independent individuals, or groups of unrelated
individuals who budget jointly) dedicate an increasing percentage of their
budget to personal insurance and pensions. Consumers at the lower end of the
income spectrum spend a disproportionately higher percentage of their budget on
housing costs. But on most other measures, including transportation, health care,
and entertainment, the percentages across income levels are fairly equivalent, as shown in the graph below:
But these percentages represent share of total expenditures,
and not all Consumer Units are operating with a balanced budget. A comparison
of income and expenditures shows that lower income families and individuals
tend to spend more than they earn while higher income units are able to stash
some of their earnings away. The graphs below attempt to illustrate this:
When you change the denominator in the first graph from Total Expenditures to Annual Income, a more accurate depiction of our spending habits is revealed. Consumers earning between $5,000 and $30,000 per year spend 62% of their income on Housing, 24% on Transportation and 23% on Food. That's 109% of their income gone just on these three basic necessities.
This modified version of the first graphic presented gives a fuller representation of household finances at different income levels in the US and paints a pretty bleak picture for low income families and individuals.
Cross-posted on Greater Greater Washington
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UPDATE:
An important question came up in response to the post above: Do the income figures include government assistance programs? The answer is mostly yes.
The chart above shows the percentage of total income by source for consumer units at different income levels. Income includes benefits from programs such as Social Security, the Supplemental Nutrition Assistance Program, and Unemployment Insurance. It excludes benefits that are paid directly to a service provider, such as Medicaid or Housing Choice Vouchers, but those amounts are also excluded on the expenditures.
The major source of income that is not accounted for here, or in yesterday's graphs, is refundable income tax credits. That mechanism helps close the gap between after tax income and expenditures slightly for lower income households, but there is still, on average, a significant shortfall that must come from a nongovernmental source.
