The Average American Spends $3.3M over Their Lifetime | Hacker News Reader

The Average American Spends $3.3M over Their Lifetime

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37 pointssharjeelsayed54 comments

Keep in mind that zero Americans were actually surveyed to arrive at this figure. The methodology was simply extrapolate from price indexes of things we think people pay for.

https://www.onemainfinancial.com/personal-loans/where-americ...

Ohh thanks for that link! I hadn't found it. Knowing how they arrived at this figure pretty much lets me know that I can discount their "findings" :-)

The nothing-else-to-do "work" of a "data scientist" no doubt.

> Our greatest ongoing financial priority is our home, with the average cost of a single-family house totaling $428,700,” the study states. “Americans tend to change residences every 15 years, pushing the average amount borrowed on housing to a staggering $1.5 million in a lifetime.”

Why are they counting homes like that? If I sell and buy my investments in my 401k, they don't count it twice.

I'm guessing because of the tendency to buy to a payment. People don't generally move to the same price range each time.

Unfortunately, there's a tendency for this to become a hidden robber of wealth over time.

So if you get a 30 year mortgage on $330k loan at 6% the total cost of the loan is $700-something-k. Go through three houses, reseting the 30 years a couple times, maybe while getting a bigger house, end up paying for 50 years, and it doesn't seem that hard to hit a million something.

That said, I super suspect the numbers might be averages of a multi-modal distribution...

Because they're counting spending, not consumption. This is incidentally why house prices are not directly included in the CPI basket of goods: neither the purchase price of a house, nor the monthly payments are what people consume (= used up) in housing per year.

It may (only because this is a specifically American thread) be worth mentioning that Canada does include shelter in the CPI.

I don't know why this would be unbelievable or "whopping." $3.3M over 60 years of adult life (age 20 to 80) is $55k/year. That's pretty close to the median American income.

Which … would be exactly what you expect, even though it’s likely inflated a bit - if I buy a house for $400k this year and sell it in ten for $500k and buy another one for $600k did I spend $600k overall or $1m? You could even argue for $500k.

You spent $1m on houses. You did not consume $1m worth of houses, nor did you spent $1m of your own money on houses if you used a loan. These are all subtly different metrics.

None of the above unless you bought them outright with cash. These are more likely to be levered transaction, which means it depends on your interest rate and term, among other things.

Don't forget that when you sold it for $500k and bought again, you likely paid $40-50k in transaction costs.

I don't think it's very common to work until you are 80 years old though. Also, is the 55K$ figure after taxes?

Sure, but after people stop working it's common for them to replace their working income with Social Security, other pensions, and withdrawals from retirement accounts in which their savings compounded over time.

And the median household income is actually $75k now. I'm just saying that $55k is very much in the ballpark for the median person. Does it really matter if that's before or after taxes?

> Sure, but after people stop working it's common for them to replace their working income with Social Security, other pensions, and withdrawals from retirement accounts in which their savings compounded over time.

Agreed, but there was no room for savings in your model as you used the whole income as spending (median income * 60 years). Taxes makes a big difference too since it doesn't count as spending. E.g. someone that earns 55K$, pays 25K$ in taxes and saves 10K$, only spends 20K$ per year, amounting to 1.2M$ (20K$ * 60 years).

$25k in taxes on a $55k income? Where are you from?

For a family in 2024, at the Federal level, the first $29,200 is untaxed because of the standard deduction. The remainder would be taxed at 10-12%. Child tax credits can easily wipe that out and make the liability negative (i.e. you get all your tax withholdings refunded plus another couple thousand dollars).

State income taxes will vary, but are typically lower than Federal income taxes. Many have no income tax.

Just picked an arbitrary number to illustrate. Regardless, we are far from the $3.3M figure. The point is simply that median income * 60 years is not a reasonable approximation for lifetime spending.

But they're also counting retirement as an expense category. Which would imply that money is being spent twice?

Good catch; I overlooked that line. I think we can take that as further proof that this article is not worth our attention.

"401k" is obviously not an "expense" independent of the things that 401k savings are actually spent on (I mean, unless one is counting the expense ratio on their mutual funds).

Yes, but $55k per year doesn’t get clicks or inspire a profound explanation.

I think you'd look at the average income, not median. I'm seeing $63k/yr which is $3.3M over 52 years. I'm seeing average retirement age as 64 and first job around 17 (47 years). Maybe I'd get closer if I added post retirement jobs (e: oh and social security payments, pension payouts) which seem common.

I feel like there are some really good core principles that could be extracted from this. There's a really strong tendency to overstate the importance of repeated expenses and understate the absolutely critical nature of strategic expenses.

The financial world is littered with bad advice in this area.

Maybe it is time for something like a new motley fool to encourage appropriate foolishness.

To me the core idea is just keep a double entry ledger. This not only helps you observe all your transactions and their cost centers, but it allows you to put long term spending habits into perspective. To your point, it allows you to correctly measure the value of your recurring expenses, and it gives you the confidence necessary to spend strategically.

Maybe it is time for schools to teach exceptionally basic and incredibly useful life skills.

It would be interesting to try to estimate what each person's demand triggers in government or corporate spend. For instance a new public swimming centre with say a 30 year lifetime might cost $10M. If they get 100 000 visits per year by on average 10 000 people, then each person effectively caused a spend of $33 capital each year.

I would be more interested in the median.

Also note that, as a back of the envelope calculation, $15/hour x 40hour/week x 52week/year x 40years = $1.248M.

Right I guess the most realistic thing about this calculation is that people who make 15 an hour have no vacation cause they can’t afford to vacation. Let’s play it out:

After taxes probably looking at closer to 900K. After paying off a 30 year mortgage, probably left with 500k? For simple math let’s say I 400k over 40 years that’s 10k left over per year to cover food and all the necessities of life. They’re living on a knifes edge and an inevitable emergency completely derails them.

>They’re living on a knifes edge and an inevitable emergency completely derails them.

I know what you mean, $1.248M sure doesn't buy what it used to any more.

More on cars than kids? Wow. I am genuinely surprised.

Hah! Unfortunately cars don't become more self sufficient as they get older

I look around at my neighbors, my friends... everyone must be doing better off than me OR everyone is just constantly living in debt and considering a car payment a permanent "tax to live" because I see people with new cars (if used, very late model) everywhere.

I am terrified of one of my cars breaking (both Toyotas, thankfully, fingers crossed, knock on wood). I dread having to buy another car when these are done.

I suspect a decent percentage of people with newer cars are leasing, since many people shop for a car based on monthly payment without considering the long-term costs.

Also, unrelated heads up since you mention older Toyotas: there's a new recall on Takata airbags from certain 200x models.

https://text.npr.org/2024/01/30/1227923226/toyota-warning-ad...

As a long time car avoider it truly baffles me the people I see driving while on minimum wage. A lot of people will just drive around either uninsured or by defrauding their insurance hoping this never blows up in their face and well it usually doesn’t.

At least where I live there's not much choice for some of those folks I don't think... If you have to work two minimum wage jobs you aren't going to make it on time going from one job to the next taking the bus unless they're quite close to each other.

Haha, I feel the same way when I compare with my neighbors! I have a “really decent” job in tech, and live comfortably, but my family does it by living in a modest sized home, driving a 15 year old car, 7 year old phone, and basically never taking vacations. But when I go drop my kid off to visit her friends, everyone’s got ginormous homes, some on acreage, beautiful furniture, 0-3 year old cars, all the latest gadgets, photos from last year’s trip to Cancun… and they’re nurses and electricians. Not that I feel I’m better than them because of my career but jeez how do they afford it all???

I’m glad I don’t have the “normal” urge to Keep Up With The Jones’s because I’d be broke!

Same here. But I know how they do it because I have some family like that: they're hip deep in debt and will never figure out how bad the situation really is until the inflow of cash that allows them to pay the interest on all of their loans stops. Then there will be a rather rude adjustment in life style.

I’m not surprised at all. People think kids are way more expensive than they really are, and think that cars are much cheaper than they really are.

My kid’s afterschool care costs more than my monthly car payments + insurance (and I have a pricey new EV). If he was still in daycare, I would get creamed even harder. Thankfully this might end in a few years, but daycare costs are no joke, and then there are lots of activity costs.

I guess it depends on how often you buy a new car, some people get new cars every 3-4 years.

Well, when you separate out housing, cars, health insurance, vacations, and education that doesn't leave a lot to fall specifically under the category of "children." If you pay for daycare, that's only a few years. For our family, the big expenses of having kids have been moving from a 1BR apartment to a 4BR house and getting a minivan. College (effectively planning to cover in-state tuition for them) will be a big one when the time comes.

It’s not necessary to spend heavily on kids. They do require a huge amount of time which comes at the opportunity cost of not working. Career sacrifices and daycare is where the big expenses are.

If you exclude third-party childcare, kids aren't that expensive in direct costs. So a typical family with an at-home caretaker sending the child to a public school and going on local vacations on their, well, car might indeed end up spending more in cars than the child.

Kids are very expensive, however, in opportunity costs - but that wouldn't appear here.

Breaking: Americans don't eat food?

Only in America can people spend more on their cars than on their children!

Doesn't seem like they're getting their money's worth.

Average, not the median.

Not sure that the 1% (or 0.1%) isn't skewing the average. Would love to see what the median American spends over their lifetime.

What I'm saying is that the 400 billionaires in the Fortune 400 are likely pulling the average up.

It’s the opposite actually. Very Rich people consume far less than average in proportion to their wealth and income.

When you look at what people actually consume, the US at least looks very egalitarian.

I would be interested in reading any papers or studies that support that statement. Because of where I live I happen to know quite a few people who are in the "upper 10%" some probably better than that, and pretty much they universally spend more on maintaining one or more additional real properties, a plane or boat with its maintenance, and generally many more days out of the year travelling and paying for hotels/meals etc than what I consider "average". Sure they shop at the same grocery stores as everyone else, and they don't necessarily spend any more on those groceries, but they do eat out more and at places that I would not consider "budget". In general, their lifestyle has a higher "burn rate" than people for whom such an expenditure rate would result in a rapid decline of their net worth.

But the problem with the original article (which was pointed out elsewhere that the number could be arrived at by multiplying the median salary of $55K by 60 years, is that without the methodology by which they reached the number, and statistics that better describe the "shape" of the data set, its kind of hard to take anything away from the statement of "$3.3M on average" that is at all meaningful.

That wouldn't prevent them from pulling the average up above the median though. Even if billionaires don't spend 30% of their income on housing, they still probably spend more than most people.

In absolute sense, yes. But in a relative sense the portion they spend on housing is going to be much smaller than what your 'average income' person spends on housing. On top of that they probably own their properties outright whereas the average income person ends up paying interest on the bulk of the price of their home for decades.

Yes but the article is talking about the total amount of money the average American spends in their lifetime as an absolute number. If a billionaire spends 100x less of their wealth compared to the average person, they could still skew the distribution, just not by as much as if they spend even more than that.

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