Expenditures

It may be true that the best things in life are free, but most necessities and conveniences cost money. According to the Consumer Expenditure Survey conducted by the U.S. Department of Labor in 1995, approximately 95% of the average American's annual income after taxes was spent on a variety of essential and discretionary items. The amount of after-tax income that went for expenditures varied not only with the individual's total income but also with his or her chronological age (see Figure 11-1). Whereas the average person under age 25 spent 14% more than his or her income after taxes,1 the percentage of after-tax expenditures declined to 97% for the 25- to 34-year-old age group, 93% for the 35- to 44-year-old age group, and 89% in the 45- to 54-year-old age group. It then rose to 93% in the 55- to 64-year-old age group and to 111% in the 65 and over age group (U.S. Department of Labor, 1996). Not surprisingly. individuals with larger incomes tend to spend more, but those with lower incomes tend to spend a greater percentage of it. The percentage of total income that goes for taxes is also greater for people be-

1Obviously, when a person spends more than his or her income, the difference must be made up of savings, gifts, or thefts.

j ■ Income Before Taxes

L [s^lncorme After Taxes

j ■ Income Before Taxes

L [s^lncorme After Taxes

Age (Years)

Figure 11-1 Average annual income before taxes and average annual expenditures by age group. (Based on unpublished data from U.S. Department of Labor, Bureau of Labor Statistics, November 25, 1996.)

Age (Years)

Figure 11-1 Average annual income before taxes and average annual expenditures by age group. (Based on unpublished data from U.S. Department of Labor, Bureau of Labor Statistics, November 25, 1996.)

tween the ages of 26 and 64—those whose incomes are higher—than for individuals under 25 or 65 and over.

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