In the budgeting world, it’s called leakage – the difference between what you think you spend and what you really spend. Leakage or spending on wants rather than needs typically takes the form of eating out, travel and just plain stuff.
In the U.S., 34% of consumers say technology is their #1 target for discretionary spending but that changes depending on where you live – below are the #1 choices on other continents*:
31% of Europeans spend on fashion
24% of Australians spend on travel
18% of Africans spend on leisure pursuits
17% of South Americans spend on beauty
16% of Asians spend on food and drink
How much of our incomes go towards spending on non-essential goods and services? Households with annual incomes below $25,000 report an average of just $5,590 a year in discretionary spending. By comparison, households with incomes of $250,000+ a year spend an average of $54,000 on nonessential goods and services.
How does that breakdown by spending category? To get down to an interesting level of detail, I had to go back to 2009 data from the U.S. Bureau of Labor Statistics. It’s based on an average American household income of $63,000.
Apparel Products and Services
Dry cleaning, clothing rental and storage, jewelry and watch repair are included in this category: 0.5% or $315
Americans continue to use tobacco products: 0.8% or $504
Entertainment Equipment and Services
This includes sports equipment, photographic equipment and supplies, hunting and fishing equipment, bikes, boats, balls and other sports equipment: 0.8% or $504
Every variety of alcoholic beverage, beer and wine are included in this category. Most of these beverages are consumed at home: 0.9% or $567
Fees and Admissions
Americans spend more in this category than on goods and services for personal care: 1.3% or $819
The more income per household, the more is spent on hotels, motels, vacation homes and lodging for weekend getaways, or for longer vacations: 1.4% or $882
Hobbies, Toys, Pets and Playground Equipment
The majority of the money in this category is spent on pet food and veterinary care: 1.4% or $882
Television, Radio and Sound Equipment
This category includes video games, cable TV connections, and DVD and CD players: 2% or $1260
Americans are generous: 2.2% or $1386
Including fast food, traditional restaurants, vending machines, food trucks and delivery services: 4.2% or $2619
The best way to get a handle on leakage is by tracking every dollar for a month or two – most people are shocked at their findings. Leakage is part of life – just don’t let it cut into your saving and investing goals.