Over the last several decades, Americans have consistently spent beyond their means.

According to the Bureau of Labor Statistics, household spending has increased tenfold since 1950. Today, Americans spend more than 60% of their budget on housing and transportation (43 and 18 cents of every dollar, respectively). Medical care (6 cents), recreation (6 cents) and education and communication (6 cents) make up the next 18% of the budget and food accounts for 15 cents of every dollar. After a family pays for clothing (4 cents) there are just 2 cents of the family dollar left for miscellaneous spending. How does that compare to what our parents and grandparents spent on similar categories of expenses? (Make a commitment to prevent finances from souring your relationship. Find out more in Say "I Do" To Financial Compatibility.)

Using the relative importance of components in the Consumer Price Indexes from the Bureau of Labor Statistics, we are able to tease out how those priorities - and spending patterns - have changed over the last five decades.

Spending as a Percentage of American\'s Total Household Budget
2007 1997 1984 1977 1967 1950s
Food 15% 17% 18% 25% 30% 32%
Housing 43% 41% 42% 33% 33% 22%
Clothing 4% 5% 7% 10% 11% 12%
Transportation 18% 17% 18% 13% 15% 15%
Medical Care 6% 7% 5% 8% 6% 5%
Recreation 6% 4% 4% 5% 3% 2%
Education & Communication 6% 4% 3% 2% n/a n/a
Sources: U.S. Census Department\'s Historical Census of Housing Tables; Bureau of Labor Statistics Consumer Price Indexes; Bureau of Labor Statistics Consumer Expenditure Survey; January 1987 Monthly Labor Review, March 1990 Monthly Labor Review; USDA\'s Economic Research Service Food Cost Review 1950 - 1997; Administration for Children and Families\' Estimated State Median Income for FY 2009; Washington State University Stevens County Extension "What U.S. Consumers Buy and Why."

Biggest Piece of the Pie: Housing
Today we're earning more and spending it on, primarily, housing. Spending on housing has increased over 20% in 50 years. More of us own homes than in decades past - 67% of Americans own their home in 2009 (falling from a peak of 69% in 2004) - and we're buying bigger, more expensive homes and spending more on furnishings. According to the U.S. Commerce Department, the average cost of a new home in 1970 was $23,450 compared to an average price of $269,200 today - a 1,047% increase in just 30 years. When you consider that the BLS records the average income in 1970 was $9,400 and that today's average income is $70,354 - an increase of 648% - you can see how the cost of housing has far outpaced our wage growth.

The fact that we're spending upwards of 50% of our budgets - 50 cents of every dollar we earn - on our homes is what makes the housing market collapse of '08-'09 so significant. People are plowing more of their money into monthly mortgage payments but millions of homeowners have actually found themselves owing more money on their homes than they're worth (a situation called being "upside down" or "underwater") because they had to take on more debt to purchase a home just before the value of their homes dropped.

The "Big Boxes" Help Our Budget: Food and Clothing
However, while we're spending significantly more on housing, our spending on food, as a percentage of our total income, is dropping at nearly the same rate. In the 1950s, Americans spent nearly one-third of their paychecks on food and beverages (including groceries and eating out); today, our total food bill is less than half of that amount. While that might seem surprising at first, consider the economies of scale realized by the industrialization of the food industry, the discounting by mass distributors like Wal-Mart and the rise of the fast food industry and you can see how Engel's Law is being played out in America. Engel's Law states that, as an individual's income increases, his/her spending on food declines proportionately.

We Can't Break Our Love Affair with Cars: Transportation
Instead of spending on clothing and food, we're using the money we don't spend on housing for transportation costs. More of us own cars than at any point in our country's history and today's cars are, on the whole, more expensive. The sticker price for a 1960 Ford sedan was $2,257; the average new car price in 2009 is $26,300, or the equivalent of more than 22 weeks of pay for the median family income. Despite the current recession, not only are cars more expensive now than in decades past, but even today we tend to buy the more expensive cars on the lot.

We Still Want our MTV: Recreation
While our entertainment costs are moderately unchanged from the 1950s, we still have more money to spend on entertainment overall, and we're choosing to spend it differently. Consumer electronics is winning a bigger share of our spending dollar, but newspapers, magazines and books have largely dropped off our "must buy" list.

Fifty years, and a lot has changed. Wars, recessions, the advent of the computer and a mission to the moon; very little of the 1950s can be recognized in our contemporary society. We're earning more than ever, but spending more than our parents and grandparents in decades past. However, while we might enjoy our current standard of living, we're racing to keep just ahead of the credit card debt that makes such a lifestyle possible. While our older relatives may have envied our relative wealth and spending on recreation, eating out and learning, they enjoyed something we can't afford to buy - peace of mind. Our predecessors saved more to be able to meet their future financial needs while, with savings levels of nearly zero, we're living on a razor thin financial edge. It's hard to know, at the end of the day, which decade really had it better. (Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive Dawn Of The Zombie Debt.)

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