Smart Budgeting: The Power of Spending Trackers
If you’re not using a spending tracker for your budget, I highly recommend it. Lots of banks and credit card companies offer it, for free, without you even signing up for it. It’s right there on their websites.
It breaks down spending by category, and by card user, if there is more than one, among other things. It’s helpful for reviewing where your money is going. Unfortunately, it might also start a few arguments.
Consumer Spending Insights: Age and Economic Trends
It seems economists have been arguing over the past few years over how the U.S. consumer is still spending money against the headwind of inflation. LPL Research released their Outlook 2025 report this week, and there’s some interesting data about who is spending the most.
The top spenders in this country are ages 45-54. You can see from this graph they spent on average, nearly $100-thousand in 2023, according to the U.S. Bureau of Economic Analysis. Those aged 35-44 and 55-64 were right behind them.
The Great Wealth Transfer: Generational Economic Shift
Not only are they spending more, but they stand to have more to spend in the future. Over the next two decades, the generations who are the biggest spenders are set to inherit $84 trillion from the older generations. This is being called the “Great Wealth Transfer.” LPL points out that younger generations are positioned to keep driving consumer spending, which accounts for at least two-thirds of the economy.
Income Inequality and Spending Patterns
It would be no surprise that higher income earners are spending more than lower income earners. But, this chart shows us just how much more. The top 20% of income earners account for nearly 40% of total spending. And the top 40% of income earners are carrying 60% of the consumer spending load. That comes from a BLS Consumer Expenditure Survey.
Wage Growth and Financial Health
So, how are we keeping the consumer spending engine going?
LPL says data revision has revealed that wage growth has more than offset inflation over the past two years, thanks to high labor demand and job-switching. In fact, workers are even saving more of their incomes. Disposable income grew faster than real spending, and the average savings rate for workers is 5% in the most recent data. That’s approaching the pre-pandemic level of 6.5%. This, of course, positions workers to be more prepared for unexpected expenses above what their cash flow can cover.
Economic Headwinds: Challenges Ahead
There are headwinds into 2025, though. LPL predicts consumer spending will slowdown from its breakneck speed. The labor market is slowing too. The quits rate is falling as workers are less inclined to switch jobs and the average workweek for private payrolls has declined, suggesting weaker labor demand.
Closing Remarks
There’s a lot to unpack in Outlook 2025, and we will dive more into it, in the coming weeks on our Fastest 4 Minutes in Finance.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance. Independent Advisor Alliance and GenWealth Financial Advisors are separate entities from LPL Financial.
