Monday, July 28, 2014

Where your Dollars Go

Americans today spend their money on the same things they always have, including housing, health care, transportation, food, and entertainment. But while what we spend money on has stayed essentially the same in recent decades, how that spending is distributed has changed in significant ways. In 1952, health care costs made up just 5% of Americans’ annual spending.1 But health care costs have risen substantially over the decades, partly due to the increased cost of advanced medical technology.

Meanwhile, improved efficiency in production and manufacturing methods pushed down the cost of food and clothing. In 1952, Americans spent more than 40% of their income on what they wore and what they ate. Sixty years later, those categories made up just 17% of household spending. At the same time spending has been reduced on food and clothes, the amount spent on financial services and insurance has more than doubled between 1952 and 2012.

                             1952 1972 2012
Food                          29%  21%  14%
Housing                       16%  18%  18%
Health Care                    5%   9%  20%
Transportation                11%  13%  10%
Clothing                      11%   8%   3%
Financial Services/Insurance   3%   5%   7%
Recreation                     6%   7%   9%

-- T. Rowe Price Investor, June 2014

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