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What Are Living Expenses? And How Much Do You Need?

4-minute read

When you pay your bills every month, you’ve probably noticed that certain expenses rarely change. This list includes things like your rent or mortgage, food, utilities and more.

These purchases are often called living expenses. They’re necessary for you to maintain your home and stay in good health.

It’s important to know what your living expenses are and how much you’re spending on them. Knowing this will make it easier for you to create a budget and live within your means.

What Is The Definition Of Living Expenses?

Your living expenses are the items you can’t afford to cut out of your budget. These expenses keep you safe and healthy and allow your home to run smoothly. This list includes things like your mortgage, food, water and electricity.

In comparison, there are probably many items you would like to add to your budget, but they aren’t necessary. For instance, you may occasionally splurge on eating out or watching Netflix, but these items aren’t an essential part of your budget.

What Are Necessary Living Expenses?

Necessary living expenses are mandatory for you to remain in good health and for your home to function. If your monthly budget was cut in half tomorrow, your necessary living expenses are the items you cannot afford to cut out.

Determining your necessary living expenses may sound straightforward, but you probably have a lot more on that list than you realize. In general, necessary living expenses fall under the following five categories: 

1. Housing Expenses

According to the U.S. Department of Labor, the average household spends $20,091 a year on housing. But your cost of living expenses goes beyond just your monthly rent or mortgage payments. It also includes things like utilities, waste removal services, homeowners insurance, and property taxes.

Plus, if you own a home, you’ll have to spend money on maintenance costs. Maintenance costs include things like mowing the lawn, paying for general repairs, fixing your roof after a hailstorm, and more. 

2. Food And Groceries

Your food costs include your weekly trips to the grocery store. But this also includes things like vitamins and supplements, cleaning supplies, and personal care items, like shampoo and conditioner.

3. Transportation

If you have a job and regularly need to leave your home, then you’ll need a way to get there. Everyone has transportation costs, whether you drive a car, ride the bus, or ride your bike to work. 

If you own a car, your transportation costs will be the highest. You’ll have to pay for gas, auto insurance and regular maintenance. Even if you don’t own a car, you’ll still have to pay for public transportation or Uber rides. 

4. Healthcare Costs

Healthcare costs add up quickly, and there’s no way to get around paying them. By skimping on this budget item, you could seriously compromise your health. 

According to the Centers for Medicare and Medicaid Services, the average U.S. household spends $10,739 per person on healthcare costs. These expenses include things like insurance premiums, office copays for general practitioners and specialists, pharmacy copays and over-the-counter medications.

5. Clothing 

At first glance, clothing may seem like more of a want than a need. But everyone needs clean and appropriate clothing to wear. You need undergarments, shoes for walking around in and clothes for daily wear.

If you work in a business setting, you’ll need to make sure you have work-appropriate attire. And if you live in an area with a lot of seasonal changes, you’ll need to be prepared with the right clothing.

What Are The Average Living Expenses For A Single Person?

The amount of money you spend on living expenses will vary greatly depending on whether you’re single or have a family. Single individuals may not have as many living expenses as someone with a family to take care of. 

So what are some expenses when living on your own? Here are some of the necessary living expenses you can expect to have if you’re single:

  • Rent or mortgage 
  • Transportation 
  • Food and grocery store costs
  • Clothing
  • Healthcare costs

You may be able to cut down on some of these costs quite a bit. For instance, if you rent an apartment, you won’t have to pay for maintenance costs. And your food and healthcare costs will be much lower since it’s just you. 

What If I Can’t Cover My Living Costs?

Now that you understand what life expenses are, what should you do if your living expenses are higher than your income? At this point, you have two choices: you can increase your income, or you can cut down on your costs. 

Nobody likes the idea of cutting down on their expenses, but this may be a lot easier than you think. Here are some quick ideas for how you can cut down on your expenses:

  • Live with a roommate so you can share the rent or mortgage payments
  • Move to a smaller home or apartment
  • Shop at less expensive grocery stores and stop eating out
  • Buy items in bulk at stores like Sam’s or Costco
  • Ask your doctor to prescribe you generic prescriptions
  • Walk or ride your bike to work

Shop at discount stores, thrift stores, and use coupons

Bottom Line

Knowing what your monthly living expenses are is a crucial aspect of budgeting and managing your money. If you aren’t sure about your living expenses, list out some of your most common monthly costs. This can help you determine what your necessary living expenses are.

And make sure you track your spending every month, so you’ll know if you start spending beyond your means. To learn more about this topic, feel free to check out our guide to creating a budget. You can also check out our personal finance learning center for other articles like this one.

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