Cost of Living by Budget Category: Where Your Money Actually Goes

Where the Numbers Come From

The Bureau of Labor Statistics conducts an annual Consumer Expenditure Survey (CES) covering more than 50,000 U.S. households. The CES asks detailed questions about spending in every major category, housing, food, transportation, healthcare, apparel, entertainment, education, personal services, insurance, and more.

The CES is the source of the household spending shares cited throughout cost-of-living analysis. BEA uses it (along with the related National Income and Product Accounts personal consumption expenditures data) to weight the components of Regional Price Parities. Academic researchers, federal policy analysts, and personal finance writers all draw on CES for their decomposition of household budgets.

Below is the recent CES picture for the average U.S. household. We will then work through how each category varies by household type, geography, and life stage, and how to use the breakdown for your own budgeting.

The National Average Breakdown

Recent CES data places average annual U.S. household consumption at roughly $77,000 per year. The category breakdown:

• Housing: roughly 33% - rent or mortgage interest, property tax, maintenance, utilities, household operations, and household furnishings.
• Transportation: roughly 16% - vehicle purchases, gasoline and motor oil, vehicle insurance, maintenance, public transit, parking.
• Food: roughly 13% - about 8% food at home (groceries) plus 5% food away from home (restaurants, takeout, prepared meals).
• Personal insurance and pensions: roughly 12% - Social Security, private pensions, life insurance, personal insurance other than health.
• Healthcare: roughly 8% - health insurance premiums, medical services, drugs, medical supplies.
• Entertainment: roughly 5% - fees for admissions, audio-visual equipment and services, pets, toys, hobbies.
• Cash contributions (charitable): roughly 4% - donations to charity, alimony, child support paid.
• Apparel and services: roughly 3% - clothing, footwear, dry cleaning.
• Education: roughly 2% - tuition, books, fees, supplies. Higher for families with school-age children, especially in private school markets.
• Personal care: roughly 1% - haircuts, cosmetics, personal-care services.
• Other: roughly 3% - alcohol, tobacco, reading materials, miscellaneous.

These shares add to slightly above 100% in published data because some categories are reported on different bases. The numbers above are rounded to give a clean conceptual picture.

How Categories Vary by Income

The CES publishes spending breakdowns by income quintile. The variation across quintiles reveals how budget composition shifts with affluence:

Lower-income households

Households in the bottom quintile spend a higher share on essentials, housing (roughly 40%), food (roughly 16%), transportation (roughly 16%), healthcare (roughly 8%) - and less on discretionary categories. Total spending often exceeds reported income because many lower-income households are drawing on savings, public assistance, or unreported income.

Middle-income households

Middle-quintile households spend close to the overall average shares, 33% housing, 13-15% food, 16% transportation. Discretionary spending begins to grow; entertainment and dining away from home rise as a share of budget compared to lower quintiles.

Higher-income households

Top-quintile households spend a lower share on essentials (housing closer to 27-30%, food closer to 10-12%) and a higher share on discretionary spending, entertainment, education, charitable giving, and savings. The headline amount on housing is much larger in dollar terms, but as a share of total spending it is smaller because non-essential categories grow faster than essential ones.

This income-related variation has direct implications for cost-of-living analysis. A high-income household's all-items RPP exposure is dominated by services and entertainment categories more than by rent. A lower-income household's RPP exposure is dominated by rent. Two households of different incomes in the same metro experience that metro's cost of living differently.

How Categories Vary by Age

The CES also breaks out spending by age of household reference person. Patterns shift with life stage:

Under 25

Lowest total spending of any age group. Higher share on rent (often 40%+), apparel, and entertainment. Lower share on healthcare. Limited mortgage interest because few in this group are homeowners.

25-34

Spending rises sharply. Housing remains the largest category, but the mix shifts toward homeownership for some. Childcare appears as a meaningful line item for households with children. Food away from home is a high share.

35-54

Peak earning years and peak spending. Education spending rises (children in school). Insurance and pensions rise. Total spending is highest.

55-64

Spending begins to decline as children leave home. Mortgage interest may decline for those approaching paid-off homes. Healthcare share starts to rise.

65 and over

Total spending lower than peak years. Healthcare share rises sharply, often above 13%. Transportation share falls. Work-related expenses (commuting, work clothes, etc.) approach zero. Many households at this stage own their home outright, which decouples their housing share from current rent levels.

For retirees specifically, the retirement cost-of-living guide walks through how to apply retiree-typical weights to BEA RPP for a more accurate cost-of-living comparison.

How Categories Vary by Geography

Households in different metros allocate budgets differently. The geographic variation is largely driven by housing costs:

High-cost coastal metros

Households in San Francisco, New York, Boston, and similar metros allocate a higher share to housing, often 40-50% for renters in central neighborhoods. The trade-off is lower discretionary spending on entertainment, dining, and savings, all else equal. This is the structural reason expensive metros feel financially constrained even at higher nominal incomes.

Mid-cost metros

Atlanta, Dallas, Phoenix, and similar metros have moderate housing shares (typically 30-35%), leaving room for higher discretionary categories. Households at the same income level can save more or spend more on entertainment and travel than peers in coastal metros.

Low-cost metros

Cleveland, Memphis, Birmingham, and similar metros allow housing shares as low as 25-28% for households earning national-average wages. The remainder of income flows to non-housing categories or to savings. Real saving rates can be substantially higher in low-cost metros for the same nominal income.

Rural areas

Rural households often spend a higher share on transportation (longer commutes, more vehicles, more fuel) and a lower share on housing. The mix can produce surprising results in cost-of-living comparisons, a rural household with one less vehicle and a paid-off home can be financially more comfortable than a metro household at higher nominal income.

Building a Personal Budget Comparison

For a personalized cost-of-living analysis, work through your own category shares against the BEA components. The procedure:

Step 1: Compute your actual shares

Pull the last 12 months of spending from your bank and credit card statements. Categorize each transaction into the 11 CES categories above (or a simplified version, housing, food, transportation, healthcare, other). Compute each category's share of total spending.

Step 2: Note where you differ from average

Compare your shares to the national averages above. If your housing share is much higher than 33%, you are housing-burdened relative to average, the rents component RPP will dominate your cost-of-living experience. If your transportation share is unusually low (transit-heavy metro, paid-off vehicles), you are less affected by transportation cost differences across metros.

Step 3: Apply your shares to BEA component RPPs

For each candidate metro, multiply each component RPP by your share weight. Sum the products. The result is a personalized RPP that reflects your spending pattern.

Example: a household with shares 40% housing, 13% food, 12% transportation, 9% healthcare, 26% other, evaluating Cleveland (rents 71, services 95, goods 96):

Personalized Cleveland RPP = (0.40 × 71) + (0.13 × 96) + (0.12 × 95) + (0.09 × 95) + (0.26 × 95) ≈ 86.

Compare to all-items Cleveland RPP of about 91. The personalized number is lower because this household has a high housing share, and Cleveland's housing component is well below the national average.

Step 4: Compare to other candidate metros

Run the same calculation for the other metro under consideration. Compare personalized RPPs rather than all-items RPPs. The personalized comparison is more accurate for your specific situation.

Step 5: Layer in taxes

Add state income tax, property tax, and sales tax differences. The tax planning guide covers the procedure.

Useful Decompositions for Common Decisions

Job offer evaluation

Compare the offer's gross salary to local cost. A 25% raise that comes with a metro change to a 30% more-expensive market is a real-income decline. Use the all-items or personalized RPP to compute the breakeven raise.

Remote work geographic arbitrage

For remote workers whose nominal salary stays constant, a move to a lower-RPP metro produces a direct real-income improvement. The size of the improvement equals one minus the ratio of new metro RPP to old metro RPP.

Retirement relocation

For retirees on fixed incomes, the geographic arbitrage opportunity can be even larger because retirement income is generally not adjusted for new-metro labor markets. A 10-15% real-income improvement from moving to a lower-cost metro is possible and permanent.

Family planning

Adding children shifts a household's spending mix toward childcare, education, healthcare, and food at home. The share of housing in expensive metros becomes especially burdensome for growing families because larger units cost disproportionately more in supply-constrained markets.

Where the Detailed Data Lives

The Bureau of Labor Statistics publishes the Consumer Expenditure Survey at bls.gov/cex. The data is available in interactive tables and downloadable files, with breakdowns by income, age, household size, region, and many other dimensions. For most personal budgeting questions, the published average tables are sufficient. For research applications, the raw microdata is also available.

BEA RPP, which uses CES-derived weights, is at the BEA Regional Price Parities page. PlainCost integrates BEA RPP into per-metro and per-state pages on this site, with cross-links to relevant guides like this one.

Putting It Into Practice

For most households, an hour of spreadsheet work, categorizing 12 months of spending and computing personalized component weights, produces a far better cost-of-living comparison than any one-line listicle ranking. Combined with BEA RPP and a basic state-tax look-up, the resulting analysis is the most defensible cost-of-living comparison available to a layperson.

The PlainCost tools are designed to support this work. The salary calculator handles the headline RPP layer. The comparison tool shows component RPPs side by side for two metros. The metro and state pages display the underlying data. From there, the personalization is an exercise in applying your real spending shares to the published numbers.

Frequently asked questions

What share of household spending goes to housing?

BLS Consumer Expenditure Survey data places average shelter spending at roughly 33% of total household consumption. This includes rent or mortgage interest, property tax, maintenance, utilities, and household operations. Higher-income households often spend a smaller share on housing; lower-income households often spend more.

What share of household spending goes to food?

Food spending averages about 13% of household consumption, roughly 8% on food at home (groceries) and 5% on food away from home (restaurants, takeout). The shares vary by household income and composition; lower-income households spend a higher share on food at home.

How much should I budget for transportation?

Transportation averages about 16% of total spending nationally. This includes vehicle purchases, gasoline, insurance, maintenance, and public transit. Households in transit-rich metros may spend less; rural and exurban households often spend significantly more on driving.

What is the average healthcare share of spending?

Healthcare averages about 8% of household spending overall but rises sharply with age, over 13% for households 65 and older. The figures cover health insurance premiums, medical services, drugs, and supplies. Out-of-pocket healthcare can vary by household by orders of magnitude depending on chronic conditions and insurance coverage.

Are these spending shares the same in every metro?

No. Households in expensive metros often spend a higher share on housing and a lower share on everything else. Households in cheap metros have more room for non-housing spending. The BEA's RPP all-items index uses national-average shares; for personal budgeting, calculate your own shares based on your actual spending.

Calculator Apply RPP layer Step-by-step Worked example Retiree weights Retirement-specific Tax planning Tax layer