According to the CIA, the life expectancy at birth for Americans is 78.37 years (https://www.cia.gov/library/publications/the-world-factbook/geos/us.html). Taking into account all living expenses (the cost to your parents to raise you, housing, college, health care, daily cups of coffee at Starbucks, funeral expenses, etc) how much money does a person go through in their lifetime? What does it cost to live a full and comfortable, but not necessarily lavishness, life in the United States?
average cost to raise a child from birth to 18 in 2010: $222,360, not including college
To simplify, let’s say that the cost of college will be absorbed into student loans that will be paid off as you work throughout your adult life.
Average personal income for US citizens is $32,000 per year, and let’s just be generous and say 80% of your income goes on self-expenses (loans, coffee, food, clothes, mortgage, retirement, taxes, etc). Let’s assume you start working at age 25 and retire at 67 for a total of 42 years worth of work.
42 * 32,000 * 0.8 = $1,075,200 spent on yourself throughout your life. add the cost of childhood, about 200,000. And we get a total of about 1.2 million for your “average” american. Then you retire, and live off of your retirement and social security for a while. Not sure how to really estimate this, but let’s just say it adds 200K. So somewhere about 1.4 million total might be right.
Now obviously at the end of your life you’ll probably have some real-estate, and a fair amount saved up, so my calculations are probably off. This was just a quick and dirty try to answer your question. I’m definitely open to criticism.
I’d say the numbers estimated for retirement are off. Most retirees are going to be spending pretty close to the same 0.8x32,000 per year. This may be a combination of Social Security, retirement savings, pensions, etc. That’s another $280,000.
And they’ll be getting about $11,000 a year in Medicare benefits over 13 years (65 to 78). That’s another $140,000
So I think you can safely add another $200,000 for post-retirement expenses and that would put you up closer to $1.6 million.
I’m not even sure about the 0.8 factor… since many people are actually spending more than they make.
Be careful you don’t count money they earn & save while working and then count the same money again when they spend it in retirement.
I’d say count only the money spent, not the money earned. Even if someone makes a million dollars, that doesn’t mean that they needed that whole million to live. Money left over at death is just savings, it doesn’t count towards living expenses.
About $4 million. But really the question leaves a lot to interpretation of what assumptions are made. If I as an American sell and buy a new house ever 6-9 years, what have I spent, what have I earned, and really how much of that was really just the bank’s money or inflation. Probably you are not interested in how frequently I can buy and sell a $250,000 home in my life. What should we do about inheritance, savings, debt, government debt, government spending on me…
It makes most sense to look at something like GDP, and presume that on average savings and debt (including both personal and government) net out to zero, and likewise taxes paid and government spending on my behalf net to zero, and that we should be looking at “consumption” not frequency of repetitive transitions of exchange. Further a average life expectancy should probably be assumed. Given that I will spend money on my children just as my parents spent money on me we will not worry about who is doing the spending when and again presume that the equivalent balancing consumption is made at some point time. Finally discounting, productivity increases, investments in machinery of production, purchasing power parity (ppp or CPI), increasing standards of living, investment earnings. Well none of this was specified, it will be easiest to assume zero adjustment, but were we to assume a 2% increase over time and an 80 year lifetime the difference in this measure between a new born and a 80 year old would be (the new born would expect over 80 years to spend x 193.772, and the recently deceased over the last 80 years would have spent x 39.74451) almost a factor of 5 times more for the new born than the recently deceased (or in the other direction 1/5=20%). If the increase were assumed to be larger or have additional productivity components…
GDP per capita $55,904 (2015)
Life expectancy (when you are dead) but before such time 79 years (one 2016 est; and seems reasonable based on various other 2010-2015 estimates being between 78 and 79.)
$55,904 x 79 = $4,416,416
That being said with our 2%/year adjustment average for people at the end of their life now may be closer to $2M and for those at the start of their life this may be closer to $10M,
Further I am sure that as in all other countries even in the US there are some back woods or swamp or mountain farmer living on subsistence farming living on the equivalent crop/productivity $5 a day and only on rare occasion actually trading with anyone else, but probably bartered exchange without currency. So this could be $0 or $146,096 (= $5 x 80 x 365.24) depending on your point of reference. Those living in extreme poverty on $1 a day would spend $29,219, if they lived to 80 but at this point we would probably need to make a large adjustment for life expectancy due to the conditions that $1/day imply that they are living without any substantial medical care and may face long periods of famine…
The lowest life expectancy I could find since 2010 was for Angola 38.2 years (Haiti was similar but did not have a posted average). The World Bank forecasts that 702.1 million people were living in extreme poverty in 2015, the older $1/day 1996 US prices extreme poverty benchmark was being PPP adjusted upward each year but then in 2015 was reset to $1.90 a day. That is 0.7B people will live their entire life on less than $26,509 (= $1.90 x 38.2 x 365.24). Were Bill Gates to give his entire net worth of $79.2B on those in extreme poverty to supplement their income (for their short 38.2 year lifetime) he would could not even raise their available daily spending by a $0.01 (less than +one cent/day, I got +$0.008/day). Thus Bill Gates objective of eliminating poverty by implementing programs that will empower people to improve their own conditions, is probably a better way of spending his money on charity.
Further for the not very average Bill Gates what is he spending on himself, even though he is giving away most of his worth of $79.2B, he will none the less likely spend some of this on himself and family, perhaps at least 1% but probably not more than 10%. So this gives you something in the $792M-$7.92B range. It is likely that most billionaire will give away or leave in their estate much of their net worth, so probably there are few if any individuals spending more than $10B in their lifetime. Inflation will of course change this number with the passage of time and point of reference.
This seems to work well for my situation. Currently I am spending just over $72K/year. That gives $5.5mill total. Obviously it was a lot less when I was a child. Not expecting it to increase past the inflation rate in the future. Given that, $4M total seems reasonable for a middle class guy currently living in the US.
Health care costs over a lifetime for an american used to be $500,000. However that was 7-10 years ago, the costs are probably 750k+ now with health care inflation. So with health care costs over a lifetime alone adding to that, and health care being about 1/5 of all spending, I guess total spending is about 4-6x that amount. That is a guess though.
You also have to take into account that a lot of stuff we don’t pay for.
Example: the Average American pays maybe 60k in medicare taxes their entire life, of that about 30k is from them, the other 30k is from their employer. But they collect about 200k in medicare benefits over their life. So the average person is getting 170k more out of medicare than they paid into it.
Many things are funded via progressive taxes in America (military, infrastructure, etc) so the average american gets far more benefit from them than they pay for them.