DHS teacher Chris Billingsley sent in this great Decatur Federal ad, which he believes dates from the 1960s.
In an era where the average American spends only 4.6% of their income on food, it’s extraordinary to see a recommendation to allocate 32% of your after-tax income to food. That’s a full 12 point more than your mortgage!
Just goes to show you that this generation’s “unthinkable” was the last generation’s “normal”.
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Does “food” mean eating out and not just groceries? Because I would think that the average Decaturite spends far more than 4.6% of their income on eating out. At least I know that I do.
Going nearly all organic and supporting all of our delicious Decatur restaurants means we spend a TON on food. Totally worth it.
But 32%? That seems high even if you go totally organic.
It’s surprising that there’s no percentage recommended for charitable giving.
I noticed that too…but perhaps it goes under “house operation,” which is a pretty vague category. I assumed it meant utilities and maintenance, but 15 % would be rather high for that alone.
Well, the average Decaturite is not the average American. Nevertheless, we’re probably not (as a group) spending as much as you might think we are.
The late-1960s saw tremendous outcry by Americans looking for cheaper food. This was a major staple of Johnson’s Great Society program. As a result of our demand for cheap food, we now have cheap food and spend less of our income (as a proportion) than almost all other developed countries. (According the the UN and Department of Commerce, this figure is closer to 6% or 7% than 4.6%.) We can also walk into a grocery store and buy a very cheap meal in a way that you might not be able to in most places (though, the meal is probably 90% corn).
That having been said, even most developed countries today are spending much less on food than 32%. In the UK, it’s 9%, in Belgium, France, Spain, and the Scandinavian countries it’s 11-13%. You have to get to places like Lithuania, Bulgaria, Ski Lanka, or Iran before you see anything like a third of income going towards food. I, for one, would like to see us move away from the over-abundance of cheap food toward a broader reliance on high-quality food, though that will require a financial sacrifice we as a society rejected a long time ago.
If I recall correctly, the other half of that equation is the stagnation of low and middle class income levels, correct?
Yes, and with a larger percentage of income going towards housing. Our 1950’s era house in Decatur is considered “very small” by today’s standards. Most of my outer suburb co-workers could not imagine raising a family of four(4) in such a “small” house.
Families in the 50’s also typically had just one(1) car.
We’re in one of those small 3/1.5 houses, too, with 3 kids. That was normal for our neighborhood in the 50s. It is still fairly normal for the people in my family that live way out in the country. But, for my friends in the far suburbs, this is considered cra-zee. Funny how those around us shape our perceptions.
Bigger house, higher ceilings, bigger cobwebs and harder to reach them, I always say.
Just did the calculation and our family spends more like 8% of our income on food. We have some bottomless pits in our household. I really and truly hide choice items in my car (if non-perishable) or in the freezer. If we counted food establishments, school cafeteria lunches, lattes, and the snack machines at work, we might get up to 10%. Shelter is obviously much higher, especially because my husband insisted on a 15-year mortgage on the last go-round. For the other categories, we probably come out similar but balance one another out–e.g. for clothing: me and my daughter bring it up over the 11%, my son brings it way down other than the sneakers for his ever-expanding feet, husband hasn’t bought new clothes since I’ve known him.
Trust me, you’re going to love that 15 year mortgage in a very short time.
Yes, she will. I have four years left in mine and I cannot wait!
Just remember, when it’s paid off, you will own, free and clear, a large asset that has very limited liquidity and lately, has been declining in value. Plus, you will be losing a pretty decent itemized deduction.
I knew I hated home ownership. But, during some previous downturn, when I panicked over having invested my life savings in a piece of Decatur with asbestos siding and windows that fell out, acquaintances reassured me with the following: 1) “They aren’t making any more land out there.” ; 2) If you are living in your home and enjoying it, then it’s not a waste, even if you lose money.” (+/- for me. Love Decatur, hate lawns.) ; and 3) “You don’t take it with you.” (…as in when you die.) Didn’t expect my home to appreciate the way it did. Didn’t expect it to depreciate the way I suspect it is. Probably don’t expect whatever’s coming next.
At Home in Decatur will also own a place to live and have no mortgage payment, which, unless I’m missing some secret math, was a greater payout than the associated tax deduction was a savings. So, a better net financial position.
As a show of the times, note that TAXES are not in the budget for the 1960s. That has got to be the biggest change. Figure out your total tax bill: income tax (fed & state), property tax, sales tax, car tag, etc. Taxes are close to the top of the expenses for most working households.
Sorry, just noticed that the top says, “After taxes”.
I am in charge of food+wine in our household and I spend 8% of my after tax income on food for 2. If I count my husbands income, that goes down to less than 3%. We eat very well, but I do try to stick to a reasonable budget.
I’m also floored by the savings recommendation: 6%? I’d NEVER retire. Maybe if I had been saving since I earned my first dollar, but I didn’t so I’m playing catch up. I save 65% of my after tax income.
“I’m also floored by the savings recommendation: 6%? I’d NEVER retire.”
Remember that many more people had pensions then they could count on. Plus, shorter life expectancy equaled fewer years in retirement. We save about 12% after taxes, but that’s after saving 15 before tax. I’d like to do better, but I guess relative to the average (which is barely over zero) we are doing ok.
I probably didn’t do my savings calculation in the most accurate way. I took gross less taxes = “net” then total savings (some of which is actually before tax and some after) / “net” = % saved. If I take total savings / gross, the % of savings is 48%. If I calculate only after tax savings divided by take home pay, then the % is 54%. Still, I’m certain, far above average but necessary to make up for decades of profligacy.
Back to food, you bring up some intereting points below and your comment about single income households made me wonder how much my gross income would be if my existing food spend was 32% of it. The answer was just over $20,000 after taxes. That’s above poverty level for a family of 2 so it is completely plausible that the 32% is reality for many families. Maybe the downward shift in % of after tax income spent on food is as much a factor of the prosperity of DM readers as it is a decrease in food costs.
Our family of 2 breaks down like this:
%12 savings (after tax)
8 rec and hobbies
10 trans (one car)
5 clothing
8 housing operation
30 shelter (mortgage, hoa, insur, taxes)
20 food (including dining out and alcohol)
7 misc.
Our food expense is higher than average, but I’d argue that dining out, for us anyway, could go under recreation and hobbies.
Another thing that has changed is that most people have to fund their retirements, so that lowers the amount left after taxes. I’d guess the after-tax savings average is close to zero now.
Also, though some things are much cheaper, like food and clothing, there are new expenses like cell phones and computers that didn’t exist then. Education is also much more expensive and more necessary. It also should be remembered that one income households were the rule during that period.