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Are We Spending Too Much on Housing and Transportation?
By JLP | June 21, 2006
Jonathan Clements’ Getting Going column is pretty interesting today. He talks about the causes of why Americans aren’t saving. According to him, two of the culprits are the amount we are spending on housing and transportation. According to Clements, housing and transportation expenses claimed less than 41% of Americans’ budgets in 1950 but were over 52% of our budgets in 2002-2003.
Clements claims that these two expenses can be reduced substantially and I agree. Most of us don’t need as much house as we are buying and most of us don’t have to have an expensive SUV. That’s not to say that these things aren’t okay. Rather, these things are okay ONLY after our other needs are met.
I just did some quick math and found that my family spends less than 20% of our income on housing and cars (not including maintenance and gas). How much are you spending?
Topics: Getting Going, Jonathan Clements | 12 Comments »
June 21st, 2006 at 10:13 am
We are also at around 20%–without maintenance, gas, and insurance–so perhaps 23% with those. But this is deceiving because we don’t have monthly payments on our vehicles. If I was to amortize our vehicles over, say, 5-6 years, we’d be around 30-35%.
I think it’s all real simple: to reduce the % these things eat out of our budget, the best thing to do is … MAKE MORE MONEY! Thank God we live America…
June 21st, 2006 at 11:14 am
How many cars did the average family have in 1950? I’m guessing Mom stayed home and Dad took the one car to work every day.
June 21st, 2006 at 11:16 am
Also, a lot of people see their housing expense as tied to their savings – buying lots of house and relying on increase in equity.
June 21st, 2006 at 11:55 am
Are you using your net or gross income to come up with this figure?
Using a gross figure we spend less than 25% even after buying a new house. But then if you use our net income, we spend around 40% on housing.
Of course our two cars have almost 200,000 combined miles on them.
June 21st, 2006 at 12:04 pm
We’re at about 35%. I like Vlad’s idea of increasing the denominator to lower the percentage
June 21st, 2006 at 3:10 pm
We’re probably at about 15-18% of our gross; we’re cheapscates when it comes to cars and live in a small house.
For us, various fed and state taxes are by far our biggest expense.
June 22nd, 2006 at 12:58 pm
We are at 18% gross, 36% net (after 401k) – including gas, maintenance & insurance. It’s always interesting to me (but not surprising) that the people who care enough to read pfblogs always seem to be *way* ahead of the “great unwashed”, no matter what the particular topic seems to be…
June 22nd, 2006 at 12:59 pm
I mean 36% gross, 18% net…
June 23rd, 2006 at 6:53 am
We spend about 20% of net income. Our two cars are paid off and we live in a townhome.
I do some financial counseling and see first-hand exactly what Clements writes about. One couple I’m working with have a car that’s worth more than their home (one of the mobile variety). Another woman had $60,000 in school loans, but bought a new car (a Honda Civic–not a Lexus!) with a $450 monthly payment that she’s stuck with for five years. Crazy.
June 23rd, 2006 at 11:48 pm
My car is certainly not the hottest thing on the block, but I haven’t had a car payment for about 7 years. It’s the only way to go.
June 26th, 2006 at 4:57 pm
Car and house are right at 35% of take home pay. That includes extra principal payments on house and mortgage payment on a condo my kids live in.
July 6th, 2006 at 5:25 pm
Wow, I need help! I just ran very quick figures. I am at 50%? My husband is losing his job at the end of the month so on my income alone I am at 50%. I rent a Condo in San Diego (away from the beaches), I have two kids. I am 30 and just starting to think about my future. I probably make more than what I figured. I have a lot of side jobs consulting along with my full time job.
Oh yeah, that 50% only includes my rent and my car payment.