How much does my family spend?
We all compare ourselves to others. I share my own family's spending patterns and compare them to the ABS household expenditure survey.
Last year I wrote about how much a renting family needs to earn before tax to be as well off as a homeowning age pensioner household.
So I asked on Twitter a while back for some other experiences after doing a quick and dirty budget that was probably a bit conservative.
Today, I want to go further and share my best guess of what my family of four—two adults and two kids at public high school—spends for a middle-class lifestyle in an Australian capital city (Brisbane).
There is often a taboo about discussing incomes and spending. Gossip channels become the main way we guess other people’s income and ponder how they manage to buy certain things.
I will present my spending estimate matched to categories used in the Consumer Price Index (CPI), and I will put the CPI weight next to each heading (i.e. what proportion of all spending the average household makes on each component) and compare it to mine.
The Australian Bureau of Statistics categorises spending in the consumer price index into the following groups, showing the percentage share of spending for the average Aussie household in each group.
Food and non-alcoholic beverages
With two boys in high school, food is a big priority for our household. We live within walking distance of Aldi and Woolworths but have a busy lifestyle so we dine out and get takeaway more often than planned.
If I had to put a number on it, we would spend about $300 per week at the supermarket, and about $200 on takeaway. This includes all the non-food household items from the supermarket and also includes those occasional fancy meals out for birthdays and special occasions.
While that might seem like a lot, remember it’s only $125 per person per week.
So that’s $26,000 per year straight up. The ABS reckons that 17% of household spending is food, and given that we are four people instead of the 2.5 per household average, that we spend more than that on food makes sense.
Food = $26,000 (22% compared to 17% in the CPI)
Alcohol and tobacco
This is an easy one. We have no smokers and I’m the only drinker in the family. I usually only drink at events, like catching up with friends at the pub, which is also not as frequent as it could be (sorry friends). I reckon $40 a week, or $2,000 per year, would more than cover it. But I imagine that this is one spending item that can easily blow out for some people.
Alcohol = $2,000 (2% compared to 7.8% in the CPI)
Clothing and footwear
I am less certain of our total spending in this category. As you can imagine, my wife is the main decision-maker here.
Two growing boys playing a lot of sports means a lot of shoes, sport and school uniforms, and generally outgrowing things. Three pairs of shoes each on average would be about $300 per person per year on shoes alone, though I’d guess a bit more, so getting close to $1,500 per year.
We are at the lifetime peak of clothes buying, and while we get plenty of hand-me-down clothes, there still seems like a lot of clothes to buy.
I’m going to have to throw out a number here. Let’s say $7,000 per year. So $9,000 per year for the total category.
Clothing = $9,000 (8% compared to 3.4% in the CPI)
We bought our house a couple of years ago, but I used money made from previous property investments to minimise the loan needed. It is probably best to add in the rent we paid previously and ignore other ownership costs, which was $500 per week.
However, these days the same house would be $700 per week, or $36,000 per year.
This category also includes household energy, so that’s about $2,000 for electricity and gas.
Housing = $38,000 (33% compared to 22% in the CPI)
Furnishings, household equipment and services
This is a difficult category. We seem to attract hand-me-down furniture and appliances so I don’t feel like we spend a lot. This category includes things like tools and appliances, cleaning services, even haircuts and childcare.
I can say that only my wife gets a professional haircut. I cut hair for the rest of us boys and cut the dog’s hair. And we don’t get any professional cleaner or gardener or anything like that.
Again, I’m going to have to guess a little here by thinking about the replacement cycle of appliances and how often I actually buy new furnishing. Let’s say $4,000.
Furnishings and housing equipment = $4,000 (4% compared to 9% in the CPI)
We don’t have private health insurance and have access to a bulk billing GP most of the time.
We all visit the dentist once a year at a cost of $200 each or so, and my eldest got $7,000 of braces last year, and my other son may get them next year (so two sets of braces over 4-5 years).
Add in other medicines and therapies, including the money we’ve spent on physio and other services and we are probably at $8,000 per year.
Health = $8,000 (7% compared to 6.5% in the CPI)
We live in an accessible inner city location and work from home or within walking distance.
We have one car, that cost $18,000 five years ago. We drive about 8,000kms per year in it. The total cost is about $2,000 in fuel, $1,000 in insurance, $900 in registration, about another $1,000 in maintenance and $2,000 in depreciation.
So that’s about $7,000, or about $135 per week for the car alone.
We probably spend about thousand or so per year on public transport (which is less than $10 each per week).
Transport = $8,000 (7% compared to 10.6% in the CPI)
We have three mobile phones, home internet, and pay for the phone and internet for some extended family. That’s about $4,000 per year
Communications = $4,000 (3% compared to 2.4% in the CPI)
Recreation and culture
This category includes things like holidays, sports, music and books, audio-visual and computing equipment, and more.
We spend about $5,000 on sports fees and gyms (remember, there are four of us all playing a lot of sport).
We spend about $5,000 on computing equipment (there are three computers, three iPads, three mobile phones, and various cases, cables, etc that come with it all).
We spend on the dog, probably a vet visit or two, food and various items, so that’s about $1,000 a year.
Camping and sports equipment is not too much, probably $1,000 or so.
Books, games, and hobbies, including Netflix and whatnot, is probably $2,000.
The big ticket item is holidays, where we try and go on a big trip every couple of years, and do our best to go away regularly. I’m going to throw out $10,000 a year on this.
So all up for this major category we have $24,000.
Recreation and culture = $24,000 (21% compared to 8.6% in the CPI)
Our kids are in public school but they still send us a lot of bills (every subject and sport has a levy). Plus there are textbooks and so forth. I’ve included uniforms elsewhere.
Until four years ago my wife and I both had a higher education debt, but those are now repaid.
Education = $2,000 (2% compared to 4.4% in the CPI)
Insurance and financial services
I’ve included car insurance in the transport category, and although we have house insurance now, since I’ve included our previous rental price I won’t add that here. We have a few bank accounts, mostly with no fees.
The main part of this category (4.1% of spending) in the CPI is other financial services which
…consists of five components; taxes on property transfers (stamp duty), stockbroking services, legal and conveyancing services, accounting services and real estate agent services. The inclusion of superannuation and life insurance service charges are being considered as part of an ongoing research and consultation effort.
The high weight to this suggests to me that many wealthy households spend a lot of money on these services.
Financial services = $1,000 (1% compared to 5.6% in the CPI)
Food = $26,000
Alcohol and tobacco = $2,000
Clothing = $9,000
Housing = $38,000
Furnishings = $4,000
Healthcare = $8,000
Transport = $8,000
Communications = $4,000
Recreation = $24,000
Education = $2,000
Financial services = $1,000
Total = $126,000
In reality, we don’t spend this much because we are now homeowners with a small mortgage, and are lucky to be in that situation because of previous investment decisions and gifts. But if we were renting the same house today, that’s what the spending profile would look like, with a little fat added in each category to account for variability.
We spend this much because we can, not because we can’t. We live a good life.
We could cut back most easily on recreation—our big holidays, and quite a bit on eating out and some on clothing. I think it would be possible for us to spend less than $100,000 per year if we really worked at it.
It is useful to compare this to the homeowning age pensioner couple who get $40,000 per year, as I did in the below post.
A family spending $100,000, of which about $30,000 is the extra cost of renting compared to homeowning, only has $70,000 of spending to support four people, or $17,500 each. In comparison, an age pensioner homeowning couple gets $40,000 to support two people, or $20,000 each.
To get $100,000 in after-tax income, a family with one income earner would need to earn about $135,000 per year in before-tax income, and in general, we would call that family “well off”.
Anyway, I don’t know what the purpose of this post really is.
One point is that it is hard to compare your own household to an average household in the national statistics since there are vastly different costs and spending needs at different stages of family life. Comparing the incomes of a household without comparing the housing status and the composition of people in that household is quite problematic.
Although we only hear complaints about the age pension being just enough to keep people out of poverty in retirement, we ignore that a young renting family household with $135,000 of gross income will have less disposable income per person.
This is why the ABS uses metrics of equivalisation to help compare households of different sizes. An extra adult is weighted as 0.5 of the first adult, and children aged under 15 are given 0.3 the weight of the first adult when adjusting for household size.
The median equivalised disposable income in 2019-20 was $959 per week. For our household, using our total spending estimate as disposable income, our equivalised measure is $1,054 per week in 2023. Likely we are close to the current median.
Finally, I think writing this post has helped me accept that I am living through some of the highest spending years of my life and that I should enjoy these years rather than worrying about the cost of them since the cost is temporary but the memories will last a lifetime. Households pass through low- and high-spending periods over their life, but also low- and high-income earning periods. That these periods don’t necessarily match up is underappreciated in policy debates.
After posting this article I spoke with Richard Aedy at ABC radio about it. Listen below.
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Despite being an economist, I am not that interested in strict budgeting and expense recording. Money exists to be spent, and time exists to enjoy.
I found this article and topic totally fascinating. I often find myself grappling with the question: ‘how much income is enough for a good / normal life?’ Turns out this is very difficult to put a number on (maybe impossible to generalise). Anyways thanks for a great post.
If I take out mortgage interest, childcare, and private education (which my wife is insisting on...) we are spending exactly $100k per year for a family of four (3 and 7 year old children). With mortgage interest $120k. Mortgage principal is saving, I think... I think a homeowning couple would need more than $50k though to have the same lifestyle.