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# How Much Money Does The Average Person Spend In A Lifetime?

• Dec 12, 2023

Amid fears of a global recession, many are searching for answers to questions like how much they would need to save for retirement or how much money does the average person spend in a lifetime.

We answer these and many other questions that might be preying on your mind below.

## How Much Does the Average Person Spend in a Lifetime?

Average consumer spending per household in the US is \$66,928 per year, and each household consists of 3.13 persons, per the Bureau of Labor Statistics (BLS) survey for 2021.

For an individual, average yearly expenses would therefore be about \$21,382 (\$66,928/3.13).

As per the latest figures, the average lifespan of Americans is around 76.1 years.

Out of this, we can safely assume that the first 18 years are non-earning.

Hence expenses at this age are likely to be borne by others.

Not accounting for inflation or wage growth, each person spends \$21,382 * 58.1 = \$1,242,294 in their lifetime.

That’s almost \$1.25 million for a single person or \$3.6 million for a family.

Note that there would be variations in these numbers between different age groups and income segments.

## Average American Spend Per Year?

On average, Americans spend \$66,928 per year, as per the Bureau of Labor Statistics (these are per household figures). In contrast, the average income is about \$87,432 (pre-tax).

Therefore, more than three-quarters of the amount earned goes into regular expenses.

The big three among these are housing (26%), transport (13%), and food (10%).

Given that so little is left for saving, it is important to follow a process to ensure it.

We cover how to do this in the next section.

## Creating a System to Manage Income and Spending

One of the easiest systems to manage income and expenses is the 50/30/20 rule of budgeting.

It hinges on the idea that out of your total monthly income:

• 50% should go toward essential needs
• 30% on wants
• The rest is on savings and debt payments

Diligently following this rule ensures fiscal discipline and adequate savings for the future.

Let’s explain it a bit more.

### Using The 50/30/20 Rule

Firstly, when we say total income, one should include contributions to 401 (k) and insurance.

If your paycheck automatically deducts these, please add them since they are also a part of your savings.

However, ensure that taxes and business spending are removed from the earnings.

From the amount you get after doing all this, separate out three sums in the proportions we introduced earlier.

You could use a simple system like separate envelopes or any other means that are easily available to do so.

Once you have all the money worked out in separate sets, here are some more things you should do.

### Automate Savings and Expenses

Create auto-debits from your checking account on interest payments, cellphone bills, gas, electricity, credit card, etc.

This way, you will never forget a payment (which can cause unnecessary fines or late fees later on).

You can automate savings as well.

Several regular investment plans, like your 401(k) or other SIPs, are available to do this.

### Get an Accountability Partner

An accountability partner helps ensure you follow the system laid out without cheating on the rules.

This could be a friend, family member, or anyone you trust.

Declare your budgets to them and have them follow up on the performance each month, taking stock at regular intervals.

### Monitor Progress

There are several online tools for personal budgeting and finance.

They can help make the task of regularly tracking everything very easy.

However, one must be diligent in entering expenses and savings into such tools, without which they cannot work.

Many apps can also connect directly to your account. They can extract all the necessary information automatically from the bank.

Some of them allow setting up thresholds on spending as well.

These can help throw up a red flag whenever a target is breached, keeping you true to your goals.

### Revise Your Budget Regularly

Earnings change with time, and so do costs.

It is important to keep revisiting the budget and modifying it according to your latest situation.

Moreover, saving goals can also change.

For example, in the 20s, saving up for a new phone might seem important.

In just five years, priorities can change drastically as family planning becomes the foremost consideration.

## How Much Money Will We ‘Touch’ Over a Lifetime?

On average, a middle-class person in the top 50th percentile of earnings in America might touch nearly \$2,197,305.

Those in the highest quartile might reach \$3,586,683.

If you are lucky enough to be among the top 5% of earners, you might touch \$6,761,582 in your lifetime.

So, how did we calculate these numbers?

It is important to first understand that earnings can vary with age.

Andrew Naber (industrial-organizational psychologist and data scientist) estimates that we spend about 90,000 hours at work over a lifetime.

For example, while most people start out with low salaries, their wages grow rapidly during their 20s and 30s.

By the mid-40s, the amounts might have grown significantly, but the growth rate would decline.

Towards the end of our careers, the growth tapers off and can even start to drop.

Next, let us look at the inflation-adjusted average of our careers and use census data to determine how much money is made during one year.

These numbers are as follows:

Someone in the top half of the pile would rake in about \$53,299 annually.

Those in the 75th and 95th percentiles would draw \$87,797 and \$166,070 per annum.

From here, one can figure out the lifetime earnings that we explained above.

## How Much Money Does the Average American Make a Month?

The average American full-time employee in America makes \$6,228 per month, or about \$74,738 per year (as of 2021 BLS data).

Please note that this includes capital gains and earnings from other sources besides salaries and wages.

Moreover, these are gross figures and are not what most people take home.

## How Much Money Will Last You a Life Time?

One way to estimate this is your average annual spending compounded by inflation and added over the duration of your entire life.

For example, let’s assume you spend about \$50,000 a year.

The average inflation rate in the US is about 3.8% between 1961 and 2022.

The last piece of the puzzle is how many years you expect to live.

Let’s say this is about 30 years more.

Then the amount needed over this time frame would be:

\$50,000 + \$50,000 * (1 + 3.8%) + \$50,000 * (1 + 3.8%)^2 + \$50,000 * (1 + 3.8%)^3 … and so on.

For those curious, the above amount turns out to be about \$2.7 million.

## What Ages Spend the Most Money?

Gen Xers, or those born between 1965 and 1980, are the highest spenders in the US right now.

Their average spending is slightly above \$83,000 per year!

The biggest expenditures of this generation are in housing, personal insurance, and healthcare costs.

This is in line with the average American spending habits we discussed earlier.

It also highlights the fact that many of them support both dependent parents as well as children.

For this reason, Gen Xers have also been called the “sandwich generation.”

The second biggest segment in the list is the millennials, born between 1981 and 1996.

Their reasons and spending patterns are similar to the Gen Xers, and many are also becoming part of the same “sandwich” syndrome.

## How Much Money Does a Family of 4 Spend in a Year?

There is no data to answer this question directly, but we can correlate it with some data we mentioned earlier.

The average American household spends nearly \$66,928 annually (or about \$5,577 per month).

Family size per household is 3.13 (on average), as per Statista.

To account for a four-person family, the amount would be \$5,577 * 4/3.13 = \$7,127

Note that this is only a back-of-the-envelope calculation, and several factors could influence it.

## Is 60K a Year Good?

The answer to this depends on your family size and where you live.

For example, \$60K a year would not cut it in a place like California, even for a single person.

But if you live in Jackson, MS, it would be a handsome amount, even for a family.

In most places outside the US, \$60K is an excellent average gross salary, but there are a few exceptions.

For example, the average UK lifetime earnings are about £3,869,685, or nearly \$4.8mn, or about 80k per year.

Hence, one might be unable to survive on this budget in the UK.

## Can You Retire with 2 Million Dollars?

It will depend on several factors, including:

• Where you live
• Average life expectancy
• Inflation
• How the money is invested
• Expenses
• Taxation
• Other retirement income

For example, with a remaining lifespan of about 35 more years and an average spend of \$60,000 a year, \$2 million would not be enough.

Of course, the answer could be very different if your retirement income changes or any other factors are altered.

For example, if an additional 20k is added to the mix through a 401(k), \$2 million would suffice.

This is why planning early and creating a nest egg to secure your financial future is important.

Note that we assumed this money is placed in an investment asset that can at least match inflation, if not beat it.

## What Is the 30-Day Rule?

The 30-day rule is a simple money management technique.

It states that for any non-essential spending that you are considering, do not purchase it for at least 30 days.

At the end of that period, if it still seems worth the money, go ahead.

The idea is to stop wasteful expenditure and impulse buying.

A variation on the rule that allows for some flexibility is to have a separate “entertainment fund.”

This lets you set aside money for that movie with friends or the dress that’s been on your mind for some time.

## What Salary Is Considered Rich?

The top 1% of earners have an adjusted gross annual income of about \$540,009 (income tax data from the fiscal year 2019).

On the other hand, the Economic Policy Institute puts the wages of the top 1% of earners at \$819,324.

These two can be considered good reference points to be called rich in America.

## Final Thoughts

The average person might spend more than a million dollars in their lifetime.

For a household, the lifetime spending amount can go to as much as \$3.6 million.

It is important to plan for enough savings to cover this amount.

Learning to budget your earnings with the 50/30/20 rule or using the 30-day trick to curb impulse buying are some ways to help.

After all, each dollar saved is a dollar earned for tomorrow.

Ritesh is an experienced copywriter who brings his decade-long work in corporate strategy and finance to bring analysis and insight into his writing.

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