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After taxes, what is the average American’s monthly income? And, perhaps more importantly, how is that income spent? Finally, how does this differ from generation to generation?
LendEDU looked to answer these questions by surveying 1,000 adult Americans about what their monthly take-home pay is and how those dollars are spent on things like mortgage or insurance payments, and living necessities like groceries.
The results produced some data points that you would expect; for example, millennials are paying the most each month towards student loans, while that debt is nearly nonexistent for baby boomers.
But there were also some surprises that go against the traditional narrative, including millennials being the most actively involved in everyday investing, while also still equaling Generation X’s monthly retirement contribution percentage.
Let’s get into the data.
The data: how Americans are spending their monthly income, including a generational breakdown
(Results are based off an online survey of 1,000 adult Americans that was commissioned by LendEDU and conducted online by Pollfish. Generational breakdowns were done according the latest information from Pew Research Center. Silent generation respondents were grouped with baby boomers, while Generation Z respondents were grouped with millennials due to a limited sample size for the silent generation and Generation Z.
- Not surprisingly, millennials have the biggest financial commitment when it comes to student loan debt. From month to month, this generation is contributing 3% of their income to student loan payments compared to Generation X (1%) and baby boomers (0%).
- By a wide margin, baby boomers were dedicating the largest proportion of their monthly income to credit card payments (17%) compared to Generation X (9%) and millennials (7%).
- Considering all monthly debt payments other than those associated with housing (credit card, student loan, miscellaneous), baby boomers proportionally had the largest month-to-month commitment (22%), compared to Generation X (18%) and millennials (17%).
- However, baby boomers are able to save the largest percentage of their income from month to month (10%) compared to Generation X (6%) and millennials (8%).
- In terms of average monthly income, Generation X led the way ($6,851), followed by baby boomers ($6,355), and millennials ($5,750).
- Dispelling a common myth that millennials spend frivolously, this generation uses 5% of their monthly income for entertainment expenses, compared to baby boomers (4%) and Generation X (5%).
- On average millennials were proportionally putting the most towards active investments other than those made for retirement accounts (4%), compared to baby boomers (2%) and Generation X (2%).
- When it came to retirement contributions, both millennials and Generation X were putting 4% of their monthly income, while boomers were putting 2%.
- Considering all investment accounts (retirement and active/personal), millennials were contributing the most month to month (8%), compared to baby boomers (4%) and Generation X (6%).
- In general, all three generations were sticking close to the 28 part of the 28/36 rule which calls for committing a maximum of 28% of income to housing costs. Millennials were committing 33%, compared to baby boomers (29%) and Generation X (32%).
- Sticking with the 28/36 rule, all generations paid much more than 36% maximum proportion of their income to all debt payments. Boomers had the largest month-to-month debt commitment (51%), while both Generation X and millennials were at 50%.
- Across the board, living expenses accounted for the second largest month-to-month expense. Millennials were dedicating 24%, compared to 25% from Generation X and 22% from baby boomers.
- Baby boomers had the largest insurance commitment in terms of percentages (9%), while Generation X (8%) and millennials (6%) were not far behind.
Tips on Managing Your Finances
Managing your finances and keeping a budget that fits within your monthly income can be stressful, if not downright impossible.
LendEDU offers a few tips below on how to manage your finances and perhaps even open up your budget a bit more.
Consider Additional Forms of Financing
If you find that your budget has become extremely tight and is leaving you with no additional income after everything has been paid for, then you might want to look into applying for additional forms of financing to free up some cash.
Look Into Refinancing
If you already have any of the above financing options, then you could always look into refinancing as a way to hopefully lower your interest rate or extend your term to reduce monthly payments and save money. Refinancing a HELOC is possible, as is applying for a debt consolidation loan that lets you repay multiple creditors with a new loan that hopefully comes with a lower interest rate.
You can also consider refinancing your student loans to ideally save some money on interest. You can even refinance your student loans more than once if it makes sense to do so. As a homeowner, refinancing your mortgage is possible, and LendEDU’s mortgage refinance calculator tells you how much you could save. Finally, refinancing an auto loan could lower your monthly payments and help you save some extra cash.
Take On a Side-Gig
The gig economy is strong these days, whether it’s driving for Uber, delivering for Postmates, or completing handy jobs for TaskRabbit. Taking on a side hustle is never a bad idea if you are looking for some extra cash to grow your monthly income and expand your budget.
If you go down this path, just be sure to get your paperwork organized and ready for tax season as the tax process for contractors can get confusing at times.
The results discussed in this survey were based off a survey of 1,000 adult Americans ages 18 and up. The survey was commissioned by LendEDU and conducted online by polling company Pollfish.
Properly-aged respondents were found using Pollfish’s age filtering feature. The generational breakdowns were completed according to the latest information from Pew Research Center. The silent generation respondents were grouped with baby boomers, while Generation Z respondents were grouped with millennials due to a limited sample size for the silent generation and Generation Z.
This particular survey was conducted over a five-day span, starting on September 23, 2019 and ending on September 27, 2019. All respondents were asked to answer all questions truthfully and to the best of their abilities.
See more of LendEDU’s Research
Author: Mike Brown