​Pay check gets divvied up across the nation
instein once said that the most powerful force in theuniverse was compound interest.
No one is in a better position to harness this forcethan those who have just started earning a regularsalary. But popular wisdom tells you that it is justthis demographic that has a tough time saving.Salaries are typically lower.
Here`s how that paycheck gets divvied up across thenation.
1. Housing (31.9%)
Among households in this age group, 61% arerenting.
The average rent/mortgage check is $894 per month(60% of the total cost on housing).Obviously, this figure will vary widely based on location.
The rest of the balance of housing money is devoted to utilities, household supplies, furniture,and appliances.
2. Transportation (16.3%)
This includes monthly payments for the purchase of new/used cars, which runs roughly $296per month.
Last year, an average of $204 per month was spent on gasoline.
The rest is used on maintenance, insurance, and [other vehicle expenses."
3. Healthcare (4.9%)
Here`s where it really pays to be young.
Healthcare spending is one of the only categories that consistently inches upward throughoutlife.
Of this total, 70% is used to cover insurance premiums, which likely means that employers arechipping in a significant percentage of the total cost of coverage.
4. Food (12.1%)
Typically, 45% is spent on eating out.
Meats, fish, eggs, fruits, and vegetables make up over 40% of the money that is spent monthlyfor food at home.
5. Entertainment (4.4%)
When you think about it, it`s a pretty good deal when you`re able to spend as much onentertainment as you do on healthcare.
I should note that these figures include the costs of pets, TVs, hobbies, and any type of eventyou might attend.
6. Pensions and Social Security (9.8%)
As you`ll see at the end, though, even with reduced benefits in the future, Social Security canplay a key role in your retirement.
7. Education (2%)
Many will argue that this number should be higher. After all, the graduation is only a beginning.Your career just started and there's a lot of skills to acquire if you wanna get promoted andpaid better.
8. Other (9.3%)
This covers a lot of different categories: clothes, alcohol, personal care products, cigarettes,donations, and even alimony payments. Lump all of them together and this is what you get.
That leaves the average household of 2 people with $423 per month.
This may sound like a lot or a little, depending on your point of view. But let`s put it inperspective. This is equivalent to saving $5,076 per year.
If we assume that a couple, aged 30, is able to put away this much every month until theyretired at age 67, adjusted for inflation, and assuming a return of 9% (just below the stockmarket`s historical average), they would have an equivalent of $484,000 in their nest eggcome retirement time.
Obviously, not everyone who reads this will represent the [average" household for this agegroup. There`s tons of variability.
If nothing else, a key takeaway should be that if you want to super-charge your savings, focuson the Big Three of housing, transportation, and food to leverage your efforts.
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