Differences in expenditure allocation by income level

March 15, 2010

The Bureau of Labor Statistics’ Consumer Expenditure Survey shows that expenditure patterns vary by income. Households in the bottom quintile of income (i.e., the 20% of households with the lowest income) spend on average about 3.75 less money than households in the top quintile. Yet, the bottom quintile (where 61% of households live in rented dwellings) spends about twice as much money on rent as the top quintile (where 91% own their homes – and as a result pay almost 12 times as much in mortgage interest and charges as the bottom quintiles).

Other significant categories in which the lowest income households spend a larger proportion of their income than the rich do are utilities, fuels, and public services, health insurance, food at home and vehicle insurance. The highest income quintile spends proportionally more on new cars and trucks, away-from-home lodging, entertainment fees and admissions and cash contributions.

The chart below summarizes the situation. The dashed line indicates the average expense ratio between the expenses of the bottom quintile and the top quintile (26%). All bars that are higher than that line indicate expense categories in which the bottom income quintile spends proportionally higher than the top income quintile.

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