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Money Talks: How American Households Spend their Money [Data Breakdown & Comparisons]

The pandemic forced everyone to put their money where ... their new habits were: Compared to 2019, most communities shifted to crisis mode, leading to an almost general contraction in household spending.

by Andra Hopulele
1,263 views
6 min. read
  • The U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey revealed that, compared to 2019, the first year of the pandemic brought down spending in almost all of the 22 largest U.S. metros in most of the spending categories.
  • Of the 14 spending categories that the BLS tracks, most metros recorded significant drops in spending related to Education and Reading, but also in Transportation, Apparel and even Tobacco and Alcohol.
  • On the other hand, several metros were clear outliers: Boston, San Diego and Honolulu saw spectacular increases in expenditures related to Cash Contributions, Education and Reading.

The more time that passes, the clearer it becomes that the pandemic was momentous enough to change absolutely everything in the short term, and affect our work and lifestyle in the long term as well. And this is even more obvious when analyzing the changes in our financial priorities and spending habits.

But the ripple effects extend much further. Although, at first, the pandemic drove all spending down, it soon jumpstarted an avalanche of price increases in almost all spending categories, prompting many analysts to state that businesses and consumers were adapting and making an almost full recovery. As BLS analysts emphasized:

“After the COVID-19 pandemic began, consumer spending in the second quarter of 2020 was down 9.8 percent from the same period in 2019. One year later, in the second quarter of 2021, the pandemic was still affecting the economy, but businesses and consumers had begun to adapt. That resulted in consumer expenditures that were 15.7 percent higher in the second quarter of 2021 than a year earlier. Consumer expenditures in the first and second quarters of 2021 were even higher than in the first quarter of 2020, which was largely unaffected by the pandemic because it began late in first quarter.”

So what’s going on at the present? Within this rollercoaster of financial challenges, inflation fears and social changes, it seems that recent events are simply piling even more money worries on financially wary families. As a result, households are dealing with a complicated and complex landscape that’s forcing everyone to switch gears and take the adaptation game to a new level.

To see the magnitude of the pandemic’s initial impact on household spending, we looked at how much American families spent on the basics in 2020 and compared those amounts to the same categories from 2019. Read on to see where the pandemic brought the most significant shifts in spending habits, as well as how people living in the largest metros prioritized their living costs.

 

After the Pandemic Began, Expenditures Dropped Almost Across the Board in Most Metros

  • Spending categories like Apparel and Services (-49.1%), Tobacco products (-44.4%) and Reading (-43.9%) saw the steepest drops, in metros like Houston, Phoenix and Baltimore, respectively.
  • The most impressive increases were recorded in categories like Cash contributions — which jumped 245% in Boston — and in Reading, a category in which associated spending went up 83.3% in Honolulu.
  • The only two categories where expenditures increased in most metros were Housing and Cash contributions.

The consistent drops in household spending immediately after the pandemic began reflected the general state of communities all over the country — suspended animation. For a while, no one was spending money on anything: food expenses dropped because no one was eating out; entertainment expenses disappeared almost completely because no one was going out; and transportation expenses fell because no one was getting anywhere near their front door (not to mention their car or the subway).

So, with expenditures falling or stalling almost everywhere, it was the increases that really stood out. For example, although food expenses generally decreased because people stopped eating out, Atlanta saw significant increases in expenditures for both food (14.5%) and alcohol beverages (31.4%). Other outliers included Minneapolis-St. Paul and Tampa, which recorded the most significant increases in transportation expenditures: 4.9% and 4.5%, respectively.

Meanwhile, there were also some expenditure categories that went up as a direct result of the pandemic — not in spite of it — and Tampa led in two of them: Healthcare-related expenses and the budget for personal insurance and pensions increased the most here. At the same time, expenditures in personal care products and services increased the most in San Francisco (10.6%), followed by St. Louis (8.2%) and Seattle (4.8%).

Another category that stood out (and it did so by virtue of the explosive jump it recorded in one metro area) was Cash Contributions. According to the BLS, this expenditure category includes “cash contributed to persons or organizations outside the consumer unit, including alimony and child support payments; care of students away from home; and contributions to religious, educational, charitable, or political organizations.” In Boston, spending in this category increased 245% in 2020 compared to the previous year.

 

In Atlanta, Living Expenses Took Up 81% of Residents’ Incomes in 2020; San Francisco Recorded Lowest Share

  • Baltimore residents seem lucky: Expenses associated with Food and Housing took up only 6.4% and 20.4% of their income, respectively — the lowest share of all of the metros in the survey.
  • At the other end of the spectrum, Miami residents dished out around 30% of their income just to have a roof over their head, while Atlanta households spent 12.2% of their yearly income on food.
  • Notably, Houston either had the most fun during the first year of the pandemic, or its residents paid the most for it: Here, 6.6% of a family’s yearly income was used to cover Entertainment-related expenses.
  • Healthcare expenses accounted for the most of a household’s income in St. Louis (7.6%) and the least in San Francisco (3.6%).

In most market analyses and studies, San Francisco and affordability don’t mix. However, this is not the case when looking at the latest data on consumer expenditures. According to the 2020 numbers, household expenses in San Francisco took up 58% of a family’s income. Granted, despite the high housing, transportation and personal insurance costs, the even higher incomes here provide San Franciscans with plenty of pocket money for the other expenses they might have.

Moreover, seven other metros had consumer expenditures that take up between 60% and 70% of their income, with families in the remaining 14 large metros left with less than 30% of their incomes after all was said and spent. This might mean that saving, traveling and other non-essential costs were relegated to the background in many cases.

Finally, the three metros in which basic expenditures took up the largest shares of residents’ incomes were Atlanta, Boston and Anchorage. Here, households were left with only 20% of their total income after covering the basics.

 

 

Although housing, food and transportation are the main expense categories, there are many other vital expenses that families need to consider when setting their budget. For example, personal insurance and pensions were on par with transportation costs in many metros, whereas healthcare costs were already eating away a big share of household budgets — only to increase further after the pandemic began.

 

Use the different tabs in the table below to review the main spending categories and see the changes brought on by the pandemic:

 

 

Methodology

  • For this study, we analyzed Expenditure data from the U.S. Bureau of Labor Statistics, for 22 of the largest U.S. metros, in 2019 and 2020.
  • We compared the amounts spent for basic life expenses in the year immediately preceding the pandemic and the first year of the COVID-19 crisis to see how the global health crisis affected spending habits and financial priorities.
  • We calculated how much these expenditures accounted for from the total income before taxes for both 2019 and 2020.

 

Fair use and redistribution

We encourage you and freely grant you permission to reuse, host, or repost the story in this article. When doing so, we only ask that you kindly attribute the authors by linking to Point2Homes.com or this page, so that your readers can learn more about this project, the research behind it and its methodology.

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