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Rising everyday costs are reshaping household budgets across the US, but not uniformly. New federal spending data for 2024 show sharp differences in how the richest and poorest Americans allocate money — a split that has immediate consequences as energy and food prices wobble this year.
According to the Bureau of Labor Statistics’ most recent consumer-expenditure estimates, households in the top 20% of pre-tax income averaged roughly $264,510 in 2024, while those in the bottom 20% averaged about $16,658. Those headline gaps translate into very different spending patterns and vulnerabilities.
How dollars and shares diverge
Higher earners spend far more in absolute terms on major categories, but those outlays make up a smaller share of their total budgets. Lower-income households, by contrast, dedicate a bigger portion of limited income to necessities.
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| Measure | Top 20% (average) | Bottom 20% (average) | Top vs. Bottom (ratio) |
|---|---|---|---|
| Pre-tax household income (2024) | $264,510 | $16,658 | ≈16x |
| Housing spending | Much higher dollars | Much lower dollars | ≈3x |
| Personal insurance & pensions | Far larger | Minimal | ≈38x |
| Transportation | Higher | Lower | ≈5x |
- Although the wealthy spend more on housing in dollars, housing consumes a smaller share of their budget than it does for the poorest households.
- Lower-income households allocate relatively larger shares to essentials such as food and healthcare, leaving less room to absorb price shocks.
- Large differences in retirement saving and insurance spending highlight gaps in long-term financial security between income groups.
Why this matters now
The US continues to display characteristics of a K-shaped economy: higher earners have generally supported consumer demand through stronger asset incomes and savings, while many lower-income households face squeezed wallets. That split matters for growth — when lower-income consumers pull back, demand for everyday services and goods weakens.
Surveys and market signals suggest pressure is rising at the bottom of the income scale. A Federal Reserve Bank of Philadelphia survey conducted in October found that people earning under $40,000 a year were more likely to trim spending than those with incomes above $150,000. Substantive shares of lower-income respondents pointed to changes in employment, household composition, or higher costs as the main reasons for altering their budgets.
Analysts warn that recent geopolitical disruptions have amplified those strains. Moody’s Ratings executives have noted that slowing wage growth and several years of higher living costs were already eroding purchasing power for lower-income households — and higher food and energy prices linked to the Middle East conflict could deepen cutbacks, especially for discretionary items like travel and leisure.
Bankrate’s senior economic analyst has likewise pointed to an oil-price shock as a channel that may force lower- and middle-income households to spend more on gasoline. Auto-club data show national pump prices have moved up in recent weeks, a direct hit to household spending plans.
Who is most exposed — and what could change
Lower-income families face the immediate risk of having to reduce basic consumption because necessities already absorb a large slice of their budgets. Reduced spending by this group tends to have an outsized effect on sectors such as dining, entertainment, and domestic travel.
Higher-income households are not invulnerable. Their resilience has in part depended on strong returns in financial markets; a significant drop in asset values or a shift in consumer sentiment could slow their spending growth too. In short, broad economic headwinds could narrow the cushion that has so far shielded wealthier households.
Policymakers, employers, and consumers should watch a few indicators closely:
- Wage growth by income percentile — whether pay increases reach lower-paid workers.
- Consumer price movements for energy and food, which disproportionately affect lower-income budgets.
- The labor market’s breadth — whether job gains are widespread or concentrated in higher-wage areas.
- Financial market volatility, which can quickly alter higher-income consumption patterns.
The BLS expenditure data for 2024 lay out the starting point; how these patterns evolve in 2026 will hinge on energy prices, wage trends, and whether lagging segments of the labor market begin to recover. For households already close to budget limits, even modest price shifts can force meaningful changes in everyday life.
