Broker Check

How We Spend

November 09, 2022

November 2022 

How We Spend 

How we spend our money is telling. It can indicate our preferences, values, and in some cases our age group. We looked at spending data across several different generations and categories. The patterns we noticed were thought provoking and often surprising. Perhaps the most interesting were spending data on personal care expenditures, housing, and healthcare. Below we share some of our insights.  

Personal care expenditures consist of products or services used to take care of oneself, excluding healthcare expenses. Some examples could include a gym membership, toothpaste, or haircuts. We see a proportional increase in personal care expenditures for both the youngest and the oldest generations. However, nominally this is a spending decrease for those generations.  

One plausible theory is that there is a base level of personal care that cannot be avoided. For example, a Gen-Z athlete may insist on a gym membership even if the cheapest gym will cost slightly more against their income. There is also a ceiling to personal care. A Gen-X person making a comfortable salary will feel empowered to upgrade their gym membership, though the most expensive gyms in the area may not charge enough to make up a larger percentage of the greater salary. 

Spending habits vary by age group, but some categories show similarities across the board. Housing expenses are expected to be the largest expense for just about everyone, and that probably doesn't come as a surprise. What is interesting is its persistence. The Silent generation is still paying more than 30% of their income for a roof over their head just like Generation Z. There does, however, seem to be a bell curve to the actual cost of housing. Generation Z and Millennials likely live in smaller dwellings or rent. As we get older, families tend to grow, prompting the purchase of a larger home. After the children move out, the homeowner might downsize to a smaller living space. 

Another persistent expense is healthcare. Not only is it not going away, but the cost continues to rise with age. Generation Z spends roughly 3.3% of their income on healthcare. Perhaps some of this group remains on their parent’s insurance plan. On the flip side, the Silent and Baby Boomer generations spend more than 10% of their income for healthcare. Those individuals in the Silent generation have signed up for Medicare by now, though the frequency and nominal cost of their expenses is much greater than for the younger groups. 

If you’re curious about your own spending, it might be helpful to track a month’s worth of expenses. Your banking app may automatically provide data about the cash flows of your accounts. Do you spend money similarly to your age group as it is described in the visual? Are there any big differences? Becoming aware of your spending activity can be a helpful way to estimate a proper budget.