Where does all your money go? Most Likely to Things That Didn’t Even Used to Exist

A few days ago I did our budget, and like a few other months, I found we didn’t have quiiitttteee enough left over to reach all our savings goals. Grumbling and a bit ashamed of my spring fever induced high spending ways, I thought to myself “Where does it all go?”

Then today I opened up the great economic tome The Rise and Fall of American Growth by Robert Gordon and was reminded that most of it is going to things my ancestors wouldn’t even recognize. So much which today feel like necessities didn’t even exist prior to 1870. You probably can think of a lot of them, for example, cars and electricity and a myriad of devices that came with it immediately come to my mind, as well as indoor plumbing. But also a bunch of things that aren’t immediately apparent, like pharmaceuticals and a whole lot of services: education, personal care, professional and household maintenance. In fact, by 2013,  spending for post-1869 goods and services made up 60 percent of total consumer spending.

And here’s a detail that really blew my mind: in 1870, most people were only spending $54 per week on themselves to keep themselves housed, clothed and fed. And that’s $54 in 2010 prices! Only $2,808 a person a year! I’ve read a lot of financial blogs over the years where it appears that the writers subsist on next to nothing, much to my admiration and envy, but I have to say none of them even come close to only $54 a week for the necessities of life.

So while I definitely can stand to cut back on some of our spending, it would be really difficult for me to slash our budget too much more because life today just has so many more “necessities” than in the past. And that’s a good thing. I’m glad that we have so many new goods and services in our lives even if sometimes I can’t get the budget to quite balance, because we get to live longer, easier, and more interesting lives.  If right now was 1870, I would be an old woman who could expect to croak in 6 years, well before I even reach 50. Now, it’s reasonable to expect to live to 78. And I have to say, I really love indoor plumbing, hot water, this computer I’m typing on, and my well-lit house that isn’t filled with disease carrying flies. Life today can be very expensive, but if you can afford even the bare minimum of what is considered necessities today, we get to live like kings compared to even 150 years ago. And that’s worth going over budget every now and then.


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