Expense

Expense summary: 

• Expenses are what you pay for products, services, taxes, fees, and other costs of living. 

• For U.S. households, housing makes up an average of 33% of total expenses and transportation averages around 17% of expenses. 

• Get familiar with all your expenses so you can find ways to reduce unnecessary costs and boost your savings. 

Expense definition and meaning

An expense is the cost of  the products, services, bills, taxes, and fees that are part of your everyday cost of living as a consumer. Understanding your expenses could help you make a budget, get rid of debt faster, and create plans for your financial future. Lenders could also ask about some of your expenses—like monthly debt payments—when you apply for a loan.   

Key concept: The money spent on goods and services that make up your everyday life.

More on expense

Expenses can include a wide range of costs—anything that is subtracted or debited from your budget. Expenses that are necessities for life, like food and housing, are called nondiscretionary expenses. Your other expenses are usually discretionary expenses.

• Nondiscretionary expenses. These are the basic necessities that you need to pay for every month. This includes things like housing, utilities, and transportation costs. These are needs, not wants.

• Discretionary expenses. These are the wants, the things you spend money on that you don't necessarily need. Discretionary expenses should always come after you've taken care of the nondiscretionary expenses.

Types of expenses 

The average U.S. household had consumer expenses of $77,280 in 2023—about $6,440 per month. Here are a few common types of expenses that almost everyone has in their budget: 

• Housing. Housing expenses could include rent or mortgage payments, utilities and energy bills, and home maintenance and repairs. In 2023 U.S. households spent about a third (33%) of their total income on housing, at an average of $2,120 a month. 

• Transportation. Transportation expenses might be the costs of car ownership, such as a car payment, gas, car repairs and maintenance. It might also be public transit costs, parking fees, or taxi or rideshare charges—whatever gets you from place to place. In 2023, transportation was 17% of the average U.S. household’s total expenses, at an average of $1,098 a month.  

• Food. Food expenses are your grocery bills, as well as food you get away from home when you buy takeout or eat at a restaurant. Food accounted for 13% of the average U.S. household’s total expenses in 2023, with household food spending of about $832 per month. 

• Personal insurance and pensions. These expenses include life insurance, plus money saved for retirement (not including company matches). U.S. households spent an annual average of $9,556 (about $796 per month) on retirement contributions such as 401(k) and IRA plans, and personal insurance policies. 

• Healthcare. Healthcare expenses may be insurance, plus copays, coinsurance, or other non-insurance healthcare costs. Healthcare made up 8% of U.S. households's total expenses in 2023—an average of about $513 per month. This number included average monthly expenses of $337 for health insurance.   

• Entertainment. Entertainment expenses are anything you buy for fun or leisure like streaming services, sporting goods, or concert tickets. The typical U.S. household spent about 5% on entertainment in 2023—an average $302 per month—including expenditures on pets, toys, and playground equipment. 

If you’re trying to get rid of debt faster, you might want to try cutting some of your discretionary expenses. If you’re looking to cut expenses in your budget and save more money, that average expense of $328 per month on food away from home could be a good place to start. Or you might want to take a closer look at your entertainment spending—could you cut a few streaming services and save $50 per month or more? Every dollar can make a difference in getting rid of debt. 

Sometimes the real cause of a debt problem is an unfortunate financial hardship that budgeting and cutting expenses won’t solve. Sometimes you just need a higher level of help. If you’re struggling with unpaid debts, getting calls from debt collectors, or losing sleep about debt, you might want to consider some form of debt relief.