Archives For March 2012

Lucy dog and her ball

We love our animals and treat them as family, but how much do we spend on pets?   It obviously varies from the lady whose cat received her $13 million dollar inheritance to the crazy cat lady down the block whose cats are overtaking the neighborhood.

According to US Census Bureau, the average family spends $58 per month on their pets.  Since 1999, our spending on pets has increased by 99%!!  That’s the highest growth of any category in our monthly expenses; even higher than the ten year increases in healthcare and education.  Like I said before, we love our pets… and the same goes for our dog.

Even though I blamed our dog, Lucy, for breaking my hand, we still love her like a member of the family.  She brings us joy on a daily basis, and I can’t imagine a day without our walks or her greeting me like I’ve been gone for ages, when I have only left for a few minutes.

However, she has turned into her own little expense factory that propels us over the average monthly spending on pets of $58.  She has allergies that last year round, and the only way we’ve been able to treat it is to put her on daily steroids.  They cost about a dollar per day.  Add to that the occasional staph infection, and we’re paying the Vet’s cable bill!  When adding in other items like heart warm and flea prevention, our medical spending alone is around the average family’s pet expenses of $58/month.

In addition, her food is more expensive because we have to buy an allergy-free formula that costs around $65/month.  Finally, add in her pill pockets for her daily pills at $12/month and we spend around $77/month on food.  That brings our grand total to around $125/month on our one dog!  We wouldn’t trade her for anything, but it does make me question getting a second dog!

How much do Americans spend collectively on pets?

The American Pets Products Association (APPA) compiled some really interesting information on pet ownership.  They estimate Americans will spend $52.87 billion on their pets in 2012!!  Pet spending has increased every year since it was $17 billion in 1994.

According to their information, in 2011, 62% of households owned a pet.  That’s up from 56% in 1988.  Also, for the record, 46.3 million households own a dog while 38.9 million own a cat.

There you have it, the average American family spends $58/month on pets… while we spend around $125!  However, Lucy weighs 75 pounds so I think we’re doing pretty good on an expense to weight ratio.  How much do you spend on your pets?

It Happens

March 22, 2012 — Leave a comment

March 22, 2012

As a relief to some of you, my writings will be shorter the next 6-8 weeks… because I’m an idiot. That’s right, a real bonehead, and I’m ready to admit it. Why am I writing shorter articles? I broke my hand! It wasn’t even an exciting story.

I’d like to think of myself as a pretty calm person, but we all have our moments. What’s the main instigator lately of these non-calm moments? The doorbell.

Every time someone rings the doorbell, Lucy (our dog) flips out and goes tearing to the front of the house. She looks like Fred Flinstone as she spins out in one spot while trying to investigate the doorbell ringer. In the process, she manages to leave her ‘tread marks’ on our wood floor.

We knew this would happen when we got the floors, but that doesn’t make it any less painful! So, in this particular example, the mailman rang the doorbell (even though she had just been here) because she had a package to drop off. There goes Lucy… I yell at her to stop, she doesn’t. I get up to go to the front of the house, and punch the couch arm with a glancing blow. The major impact was on my right pinky knuckle; I knew something wasn’t right as soon as I did it.

Sometimes we hold ourselves to impossible standards. We like to think the outside world perceives us as flawless as we try to portray ourselves. We don’t want to look like the idiot. In fact, we try so hard to not look like an idiot that we aren’t ourselves.

The most comforting words I received after my self-inflicted injury were from my older brother who said, ‘It happens, well can’t do much from here.” They were the perfect words at the perfect time because I was pretty busy beating myself up over being an idiot.

It’s true. It happens. Bad things happen to people accidentally, and bad things happen to us because we’re idiots. That’s right, idiots. Don’t get me wrong, we’re not idiots all of the time, just enough to remind ourselves we’re not perfect. All it takes is one moment of texting while driving, an overreaction in an argument, or a slip in judgment, and our lives can be permanently changed.

One thing I’ve experienced and read about is that no one ever judges us as much as our ‘inner judge’. In fact, sometimes I punish myself for something that happened 20 years ago! Dang, I shouldn’t have said that because now you’re doing the same thing. At this point you’re the only who remembers it, and you’re still hanging on to it! It happens and you can’t do much from here.

What can we do to deal with some of this current pain? The great economist and thinker, Adam Smith, said, “In all irreparable calamities which affect himself immediately and directly, a wise man endeavors, from the beginning, to anticipate and to enjoy before-hand, that tranquility which he foresees the course of a few months, or a few years, will certainly restore to him in the end.”

My hand will be just fine in 6-8 weeks, and it won’t be much more than a reminder not to do it again. However, that doesn’t mean I won’t be an idiot and do it again! We all make mistakes. It happens.

Oh ya, and if you come to our house, be sure to knock because the doorbell is unplugged. At least I learned that.

Do you know how much you spend monthly?  If not no worries because not many people do… and if they do, there’s a good chance they’re a pretty big nerd (myself included).   However, thanks to the CBO and the Consumer Expenditures (CE) team, we now have a great view of the monthly breakdown of where we spend our money!

Five years ago, I finally finished paying off my debt.  The reason:  7 years ago I experienced my breaking point and realized I sucked at managing money.  I had acquired over $50,000 of debt and didn’t have much to show for it except a new car and bachelor pad furniture.  As a side not, I lost my bachelor pad furniture in the marriage.

It got real for me in 2005 because I began tracking my expenses at an extremely detailed level.  It was somewhat excruciating doing it for so long, but it’s what led me to where I am today.  After I figured out where my money was going, I started using the cash budget system to control my spending.

Can you tell me your monthly expenses?  If not, it might be time to start tracking it.  If so, it will be interesting to compare with national averages for spending.  Let’s get to the numbers:

Monthly expense budget

As I’ve mentioned in the past, the average salary in the US Census Bureau’s survey is $60,753, which is quite a bit higher than the national average of $49,445.  You should use this knowledge to scale the ‘average monthly’ category up or down based on your salary.  One of the most interesting parts of the survey is that average income has increased by almost 50% in the last ten years.  I know many people haven’t seen this in their own lives, but someone is seeing it!

The average family (2.5 people) in the US spends $4,089 a month on expenses.  Not surprisingly, the largest category for monthly expenses is housing (34% of total).  The “Housing” category includes mortgage/rent, utilities, cleaning goods, furniture, and decorations.  It also includes “Telephone services” which I assume contains cell phone expenses; which totaled $97 per month.

The second highest expense category is “Transportation” with the third highest as “Food”.  Does this seem backwards to anyone else?  As I’ve mentioned previously, I think new cars suck if you can’t afford them, and you should try to spend no more than 20% of your salary on a new car.

The other important part of the data is the ten year change (from 1999 to 2009).  Not surprisingly, the two fastest growing expense categories are Healthcare (60%) and Education (68%).  Within healthcare, “Health insurance” grew by 94%!

The other largest detailed category expense increases were “Pets, toys, and playground equipment” at 99%, “Heating fuel” at 91%,  “Gasoline and motor oil” at 88%, and “Other household expenses” at 81%.  At least the fastest growing category is one we have fun with – pets!

Some monthly expense categories actually dropped the last ten years!  These include “Reading” at -30%, “New/Used cars” at -20%, and “Life and other personal insurance” at -22%.  I thought the 30% drop in the “Reading” category was pretty interesting because it can be pretty directly attributable to the increased information available on the internet.   Hopefully, we aren’t just reading that much less!

This is fun data to comb through and summarize, but it’s not going to be helpful to you unless you use it to take action.  How does your monthly spending care to the average?  Are there items you’ve learned to cut down on?

I thought answering how much we spend on health care would be quick, but I should have known it would get complicated fast.  Health insurance is one of those things you hate paying for until you need it!

I’m going to review the health care spending from two different perspectives.  The first perspective will be from individual’s expenses while the second is total health care expenses divided down to an individual level.  The second perspective includes all company, insurance, and government expenses.

How much do we spend on health care per family?

The data from the individual US health care spending is compiled by the US Census Bureau.  According to their report, the average family (2.5 people) spends $261 per month on healthcare expenses which includes health insurance, medical services, drugs, and medical supplies.  That equals $3,126 per family per year.

The majority of the expenses are from health insurance.  That doesn’t surprise me as my family of two pays $193 per month, and my employer adds $400 per month for my coverage!   We even changed our insurance to the higher deductible plan and were recently reminded of this when my wife had a check up and we had to pay out of pocket because we hadn’t hit our deductible for the year.  Bummer.

Health care is scary, but the scariest part is the increase in expenses the last ten years.  We always hear about it in the media, but can you believe the cost of health insurance has increased by almost 94% in ten years?!  Brutal.  It doesn’t appear to be decreasing anytime soon.

Here are the averages of how much we spend on health care per family:

Health care Avg spending per household

What’s the total spent on health care per individual?

According to the Organization for Economic Development, we spend $7,960 per person per year for health care in the U.S., totaling about $2.5 trillion.  According to the report, the U.S. Government covers 46% of U.S. health care expenditures, which means taxpayers pay for $1.13 trillion of health care spending.  This includes expenses on government health care and Medicare.

That’s a lot of money.  My personal health insurance ($7200 total, $3,600 per individual) is less than half of the OECD’s estimate per individual.  That means a lot of the money is being spent on other people.

According to another report by the Peter G Peterson Foundation, “Approximately 30 percent of Medicare spending takes place within the last year of life, and over 75 percent of health care spending goes toward patients with chronic diseases.  Some of the most expensive chronic diseases are heart disease, diabetes, and hypertension—all three of which are tied to obesity, a common problem in the U.S.”  I think we found who those expensive individuals are… not a big surprise.

Why the big difference between individual health care spending and total health care spent in the US?  The main reason is the huge amount of health care expenses associated with the final years of our lives.

According to the chart below, $2,922 a year is spent per individual on hospitals and nursing homes.  Obviously we don’t all visits hospitals and nursing homes every year, so a small percentage of people are accounting for the majority of expenses.  Another large chunk ($803 per individual per year) is spent on “Public health & administration”.  That’s what we call… Overhead!

Unfortunately, health care will continue to be one of those double-edged swords… the only thing worse than not having it is needing it and not having it!

Health spending per capita US

 

March 5, 2012

You load sixteen tons, what do you get

Another day older and deeper in debt

Saint Peter don’t you call me ’cause I can’t go

I owe my soul to the company store

I can’t count how many times I’ve watched Joe Versus the Volcano while growing up because it’s one of my parents’ favorite movies. I’m not sure if my parents meant to, but I think they were conditioning us (me and my three brothers) to fear the cubicle life! However, that doesn’t mean I haven’t given it a try…

The most visited article on my blog right now is about Golden Handcuffs, so it excited me to know I’m not the only one who fears the cuffs. Just in case you missed it, golden handcuffs are the imaginary chains tying you to your job.

If you’ve seen Joe Versus the Volcano, you know how these are connected. If not, just watch the video and it won’t take you long to figure out! Just ignore the Chinese subtitles.

As I learned from Wikipedia, the original song was written in 1947 by Merle Travis; it continues with:

“According to Travis, the line from the chorus “another day older and deeper in debt” was a phrase often used by his father, a coal miner himself.This and the line “I owe my soul to the company store” is a reference to the truck system and to debt bondage. Under this scrip system, workers were not paid cash; rather they were paid with non-transferable credit vouchers which could be exchanged for only goods sold at the company store.”

To make it worse, workers usually lived in company-owned dorms or housing and the rent was automatically deducted from their pay!

The concept of the “company store” in today’s environment is more foreign because we get paid by our employers and we can do whatever we want with the proceeds. We don’t have to spend our money at the company store.

However, instead of taking advantage of the opportunity to spend our money as we please, we find a way to create our own company store to sell our soul to! I did this when I went over $50,000 in debt. Maybe my employer should’ve sent my paycheck directly to the lenders!

The company store went away when unions forced an end to it. However, many of us are in the exact same position as the coal miners of the past. Our money is accounted for before we can even think about spending it, and we have to continue to work for the company so we can continue to pay our debts. We went from the company store being forced onto us, to us bringing it upon ourselves!

Isn’t it crazy that companies used to think they had to force us into enslavement?

We enslave ourselves to our jobs because we’re so far in debt that we can’t risk losing our income. It works out well for the company when we purchase all of our pretty things (cars, houses, boats, watches, clothes) with loans because it keeps us in bondage to our employer. I’m not saying companies are involved in an evil scheme to trick us into it – we do it ourselves!

When I paid off my debt, my job seemed way less important to me. Instead of wondering why I didn’t love my job, I was able to start thinking about other things I wanted to do with my life. It opened up my eyes beyond the company store.

The coal miner’s only option to separate from the company store was to quit their job. Luckily, we can take control of our money so we aren’t enslaved to our job. The next step should be to find work we actually like doing… easier said than done!

Are you purposefully selling your soul to the company store? If so, then it might be time for you to watch Joe Versus the Volcano!

 

Dan with some lady

Oh yes, this might be the most contentious spending category between women and men.  Most men are ‘hunter’ shoppers while many women are ‘browser’ shoppers.  When I’m shopping, I know what I need and there’s no need to look outside of my zone.  However, my wife has to see everything to figure out what she wants.  If I never got to buy new clothes again in my life, I think I’d be just fine.  However, my wife probably wouldn’t think I’m fine so that could be a problem!

Clothing is probably the most elastic spending category because it can easily increase or decrease based on our habits.  It’s probably also the most highly correlated with our salary.  If you have no money to spend on clothes, you’ll probably figure out a way to survive just fine.  Inversely, if you have a boat load of money to spend on new clothes, you can easily find a way to spend it.

You don’t have to look far to find shops on both sides of the spectrum.  I read many forums where people spend almost nothing on clothes and manage to get quite a bit.  I also see designer jeans at Macy’s that cost more than most people spend on clothes in an entire year!

So, how much does the average US family spend on clothes?  According to the data released from the US Census Bureau, the average family spent $144/month on clothes in 2009.  This includes clothes for the entire family, along with footwear.

how much we spend on clothes

The clothing category is one of the few categories that dropped in total spending in the last ten years!  Sure, it only dropped 1.03%, but that’s much better than food which has risen by 26%.  This also explains why clothing stores have had such a tough time surviving in the last decade.

The numbers are even more interesting when you look at them in detail.  Women and girls clothing expenses have only increased by 3.5% in the last decade.  So much for everyone who says women have a serious shopping issue!

However, there is one category that has increased big time in the last ten years – clothing for children under two years old.  This amount has increased by almost 36% in the last ten years!  It makes sense when you think about the new stores and designer clothes for children.  My wife has come close to buying baby clothes even though we don’t have kids just because the clothes are cute!

If you look at the total amount spent on children under two by family, the total is only $8/month.  This isn’t very high, but when you consider how many fewer people are buying for children under two (on average) than the rest of the categories, you can see it has increased a lot per kid.

Our monthly clothing budget is actually higher than the $144/month average.  We could buckle down pretty easily if we wanted to, but my wife’s job does require her to be ‘stylish’, and frankly, that amount fits into our monthly budget so we are ok with spending it.

I have heard some of my friend’s clothing budgets, and they’re even much higher than ours.  Once again, this is a high elastic category and you should make sure your clothing expenses mesh with the rest of your budget.  How much do you spend on clothing?  Have you found cheaper ways to do it?