Running for president of the United States is an expensive proposition. In the 2012 presidential campaign, winning candidate Obama and Romney spent over $1 billion each in what was called the most expensive presidential election ever.

American citizens of every political persuasion may justifiably wonder where all that money comes from and how it's spent.

Fundraising
According to the Federal Election Commission and reports from the candidates and media, the money comes from a variety of sources including large donors, small donors and organizational donations. As of March, Democratic front-runner Clinton has raised about $160 million and her primary Super PAC "Priorities USA Action" has raised over $55 million. Assuming a maximum donation amount of $2,700, approximately 73% of Clinton's raised funds have been large individual contributions. Bernie Sanders, who has refused the support of Super PACs, has raised close to $140 million and 67% of it has come from small individual contributions averaging $27.

On the other end of the political aisle, Ted Cruz has raised $66 million himself and $52 million has been donated to Super PACs that support him. Trump is largely self-funded with 70% of his campaign funds coming from loans he has taken out and Super PACs in his favor have raised a relatively paltry $2 million.

Super PAC

Although small donations from individuals add up substantially, a major source of campaign financing is the Super PAC, the special political action committees.

A Supreme Court decision in the case of Citizens United v. Federal Election Commission allowed these organizations to spend unlimited amounts of money on their preferred candidate, they are not required to fully disclose the names of their contributors, and they are prohibited by the law from coordinating their political activities with their candidate of choice. The money spent by Super PACs is part of a presidential campaign, although it does not represent money spent by the candidate. In the last presidential election, the most notable donations to these Super PACs came from major movers and players in finance. Restore Our Future received a donation of $1 million dollars from Tiger Management founder, Julian Robertson, and another $1 million from hedge fund manager John Kleinheinz, while Priorities USA saw a $1.5 million donation from billionaire mathematician and hedge fund manager, James Simon.

How Its Being Spent
According to OpenSecrets.org, a release of data by the Federal Election Commission showed that 48.9% (or $354.8 million) of donations go toward media advertisements, with administrative costs coming in second at 24.6%. Campaign expenses such as consulting, events and surveys make up 12.8 and 11.8% toward fundraising for donations. Less than 2% of expenditures are dedicated to loan payments, contribution refunds, parties and miscellaneous costs. Excluding party committees, the Obama campaign spent $459 million toward these expenditures, while Romney saw $277 million used to cover these costs.

The Bottom Line
To provide the necessary $1 billion required to run for president, candidates draw funding from donors large and small and rely on Super PACs to join the effort through advertising and other political activities. The bulk of the campaign funds collected are spent on media - print, broadcast and Internet advertising. But having a lot of money is no guarantee of a successful run for the presidency, either in the primary races or after the party candidates have been nominated.

Detailed monthly data on campaign spending is filed by both candidates with the Federal Election Commission. A comprehensive report on campaign spending, current to October 21, is available online at FEC.

Investopedia makes you smarter.
Sign up for the News to Use newsletter for the latest in expert analysis, market insights and news.