According to a news report in April 2016, family budgets are being stretched to the limit. The NBC News report indicates that most consumers are spending more but their salaries are not keeping pace. The data, which was gathered by Pew Charitable Trusts, points out that basic expenses, such as health care, food, transportation and housing, all took up larger shares of people’s household incomes in 2014 than they did during the recessionary period in 1996. The squeeze in funds is especially felt among families whose household incomes are lower.
For example, a family of four made up of two children and two adult wage earners experienced an increase in their core income of about $10,000 between 1996 and 2014. However, basic costs increased by the same amount. Therefore, the percentage of a household’s income spent on expenses rose from 71% in 1996 to 75% in 2014. This type of increase, following the recent financial crisis in the US and elsewhere, is a clear representation of how household budgets can get strained.
Based on an examination of data from the Bureau of Labor Statistics, Pew concluded that –
- Total household spending grew by approximately 25% between 1996 and 2014. However, income growth lagged significantly behind. In 2014, the average income had plunged 13% over a 10-year period while expenses increased by almost 14%.
- Low income families expended much more of their income on basic needs than families in the upper income categories. Some lower income households went into the red.
- Over the past 20 years, spending on housing has increased. However, lower income households spent the most on shelter (40%) when compared to middle income households (25%) or upper income wage earners (17%).
According to the news report, when most of a family’s budget goes toward necessities, families have less money for discretionary purchases. Discretionary purchases include such activities as dining out or entertainment. It is also more difficult to save money for any type of financial cushion.
A recent report published by Bankrate.com supports this data. The report found that about 63% of consumers surveyed said they currently do not have the additional money to for a health emergency or car repair without going into debt. According to economic experts, one of the biggest complaints about economic recovery has to do with salary growth.
Categorized as: Business