How Much Money Will the Average Person Earn and Spend in Their Lifetime?

How much money would you have if you saved every penny that you earned over your lifetime? Imagine that you didn’t have to pay for rent or food, that somehow you found a way to live for free while still being a part of the system and still earning money. How much would you have?

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The answer might surprise you, but it’s not the only thing that will surprise you. In this guide, we’ll look at how much the average American will make over their lifetime, as well as how much they will spend. We’ll also tell you how you can use this information to your advantage and keep more of the money you earn.

How Much Money Will You Earn in Your Life?

This is not an easy figure to calculate. At the time of writing, there are a few articles that have tried to address this subject, albeit briefly. However, they all rely on old data, with the most popular answers using data from the early 2000s and everything else relying on a study from 2009. 

That’s over 10 years ago and simply won’t give us the answer we seek.

Let’s assume that you’re 16 right now and have just started a job that pays you the average US full-time salary. By the time you reach 24, you can expect to have earned around $220,000, when accounting for inflation and the fact that the average earner experiences a salary spike aged 20 or 21. Continuing to account for inflation and rising salaries, you would around earn around $440,000 from 24 to 34, and close to $550,000 per decade after that, bringing you to a total of $2,900,000 by the time you retire.

Once we add a little interest from savings accounts and retirement savings, as well as dividends from stock, the average person will earn close to $3 million in their lifetime.

Lifetime Earnings for a Man vs a Woman

Previous data suggested that women have much less earning potential than men and will earn around $1 million less. Based on more recent data, this figure would be closer to $1.5 million if we made the same assumptions. These days, there isn’t as much of a discrepancy between the annual income of men and women, but the pay gap still exists, and women are more likely to take time off to care for a child and to spend more time out of work as a result.

If they delay or postpone their careers to start a family, their yearly income will take a break as well, which brings the average down. However, an educated, career-minded woman who doesn’t make these sacrifices can expect to earn close to that $3 million throughout their whole life.

Lifetime Earnings for Graduates

If you have a bachelor’s degree, the amount of money you earn increases by between $250,000 and $500,000. As much as people moan about the difficulties that graduates face when entering the job market, the statistics still stress the importance of earning those qualifications because lifetime earnings increase every step up the education ladder that you climb. 

Of course, there are outliers, and this is what confuses and frustrates people. But just because you know someone who dropped out of high school and became a millionaire or earned a master’s and ended up broke, doesn’t mean education is pointless.

How Much Does the Average Person Spend in their Lifetime

The average American spends roughly 40% to 50% more than they earn over their lifetime. In the United States, there is a huge discrepancy between what people spend and what people earn, as debt is common, credit is widely available, and the cost of living is rising disproportionately to the minimum and average wage.

As exciting and encouraging as it is to think that you will earn close to $3 million in your lifetime, once you start accounting for expenditures, the excitement begins to fade, along with your hopes for a high net worth.

Where Does the Money Go?

A sizeable chunk of that $3 million goes on income tax and another chunk is lost in interest. Every time you agree on finance for a new car or home; every time you apply for a student loan or accumulate credit card debt, you pay interest. 

Real estate is one of the best investments you can make, but if you’re repaying that home loan over 20 or 30 years, it could cost you upwards of 50% in interest, which means you’ll repay $300,000 on a $200,000 mortgage. 

The same is true for high-interest unsecured debts and even personal loans. It doesn’t matter how low the interest rate is, once you extend that loan over many years, you end up repaying considerably more than you borrowed.

And then you have to consider utility bills, furnishings, and all the other purchases you make for your home, whether you’re paying for a new bathroom or kitchen suite, landscaping the yard or just buying a new desk, table or sofa.

You will spend anywhere from $200,000 to $250,000 purchasing cars in your lifetime, assuming the price of the average vehicle continues to rise. This is one of the biggest purchases you will make, and the average person buys between 5 and 6 cars. Once you add tax, insurance, gas, and maintenance, going from A to Z is costing you upwards of half a million dollars.

Children are another big expense. It can cost over $230,000 to raise a child, and while some of those expenses have already been accounted for (housing, utilities, student debt, cars) most have not. 

Clothes and food are another important expense, one that can cost the average person up to $600,000. That includes alcohol, but if you smoke then the average cost increases by over $1 million. It’s an expensive hobby, although many smokers may make allowances to cater for it, reducing the amount they spend elsewhere to make room for their habit.

Where Does the Remainder Go?

That $1 million has to go somewhere, and the average person doesn’t die with 7-figures worth of debt, so what’s happening here?

Firstly, it’s important to note that these are just the averages and they are created by looking at average earnings, which themselves are based on tax data.

The average American household may receive lots of additional income that isn’t accounted for above and would be difficult to calculate, including:

Not to mention the people who earn money that they don’t declare to the IRS. It is estimated that more and more Americans are turning to freelancing and other side hustles to earn extra money, and many are not declaring it or skimming a few bucks here and there.

Let’s imagine, for example, that your parents give you $30,000 to cover a down payment when you’re in your twenties. In your thirties, your two remaining grandparents die and leave you with $30,000 each, and you have several small lottery wins and successful Vegas trips netting you $10,000 (this doesn’t have to be profit as the income used to make the bets has already been factored into the equation).

In your forties, your parents pass away and leave you with a substantial estate of over $300,000. Someone else who is very close to you dies when you’re in your fifties and they leave you a $300,000 life insurance settlement. 

By the time you retire, you have earned an additional $700,000.

And retirement is also key to this process and the reason you spend so much, because when you retire, you stop earning but keep spending. If you retire at 65 but live to be 90, that’s 25 years’ worth of spending; 25 years funded by all your previous years of earning.

How to Make More and Spend Less

There are a few simple steps you can take to make life easier for yourself and your family, increasing household income, reducing total spend and allowing you to become an exception to the rule, someone who actually makes more money than they spend.

Avoid Debt

Debt is one of the biggest net worth killers. Some debt is okay and can actually help you, as is the case with student loans and mortgages. Providing you’re not paying an extortionate interest rate, these debts can help to grow your worth, increase your average income, and make life easier. 

However, credit cards, payday loans, and even car loans can be crippling if you’re not careful.

The less debt you have at your current age, the more likely your finances are to flourish in the future.

Get Insured

Car insurance, homeowner’s insurance, health insurance, life insurance, all these options can save you a small fortune. Of course, you’re paying to receive them, but if you’re ever hit with medical bills and don’t have the insurance to cover them, you’ll be massively out of pocket.

As for life insurance, it can play a massive role and make life much easier for you. If you insist on everyone in your family applying, then you’ll be compensated when they die. It’s a morbid topic, and no one wants to profit from the death of a loved one, but you have to be practical about things. If you’re relying on them financially, they need to be insured.

Think Long Term

Now that you know how much you’re likely to make and earn, it’s time to create some financial goals. The reason so many Americans are so heavily in debt is because they fail to see the bigger picture. If they have $10,000 worth of debt, they don’t think about the $8,000 they will spend in total interest and only the $200 or $300 that it costs them every month. 

By focusing less on what you have right now and more on what you can have in the future, you can greatly improve your financial situation. 

Imagine that you are going to make $3 million, spend $4 million and then start making changes that will help to bridge that gap. For instance, instead of blowing a $10,000 inheritance on a family vacation, use it to clear that $10,000 credit card debt. Not only will you avoid blowing $10,000, but you’ll save yourself a huge sum of interest in the process, greatly reducing your total expenses.

Save and Invest

You won’t make a great deal of money from savings accounts, as the average rate is less than 2%. However, they prevent you from accessing and spending that money, which is key if you want to save for your future.

Stocks can also help, if you know what you’re doing. By investing in blue chip stocks, you can earn a regular dividend, which increases your net worth and total earnings, all while the stock remains just as valuable (if not more so) as the day you bought it. 

It’s like buying a house that you rent out. Not only will you earn a little cash here and there, but that asset remains in full and, while it’s subject to market fluctuations, may be worth more in the future.