Spending 'Round the World

Aug. 17, 2008— -- What does your personal budget look like? If you've never put cursor to spreadsheet to figure that out, the flagging economy may soon force your hand. If you have, and are dismayed by the data, you might want to think hard about where those precious dollars are going--and why.

For some valuable perspective (and perhaps belt-tightening inspiration), take a look at global consumer-spending patterns. Data from the World Bank's most recent and hugely comprehensive International Comparison Program study breaks global individual consumption into 11 buckets--from food and clothing to health care and recreation.

Click here to learn more about world spending at our partner site, Forbes.com.

Forbes.com took a snapshot of overall allocations for 18 countries, measured as percentages of total individual consumption (rounded to the nearest percent). While the figures capture patterns as of 2005, recent inflation in energy and food prices no doubt has shifted these results a bit.

The most striking--and downright shocking--data are the disparities in the relative chunks of income that go toward food and drink. Impoverished denizens of Ethiopia and Egypt, for example, spend an estimated 55% and 43% of their incomes, respectively, on food and non-alcoholic beverages (excluding purchases made at restaurants, bars, hotels and the like). Americans and Canadians: just 6% and 8%.

On a happier note, Russians and Croatians clearly like to party: They set aside 6% and 5% of their budgets for booze, tobacco and narcotics, more than the rest of the countries on our list, while Saudi Arabians' conservative intake barely registers in the numbers.

Russians also spend freely on clothing and footwear, which gobble 9% of their outlays, versus just 4% for ostensibly hungry U.S. consumers. One reason for the disparity: the flood of artificially inexpensive imports to the U.S. from China.

What Russians don't seem to be shelling out for is shelter and power--the combination of housing, water, electricity, gas and other fuels merits just 9% of Russians' overall consumption--thanks in part to lingering Soviet-era subsidies. Turkish consumers, who enjoy few subsidies while suffering high taxes, spend 24% of their incomes on these necessities, the highest of the bunch.

Little surprise that U.S. consumers, long strapped by a sadly inefficient health care system, allot the highest percentage of their budgets--a whopping 18%--to medical care; meanwhile, Brazil, Russia, India and China (known by economists as the BRIC countries) shell out just 8%. For the complete World Bank comparison report, click here.

Next, we took a closer look at how Americans spend their gradually shrinking discretionary dollars (as opposed to money spent on necessities like food, housing and utilities). This more recent data--courtesy of Spending Pulse, the economic research arm of MasterCard WorldWide--divides U.S. consumer discretionary spending into eight buckets: air travel, e-commerce, electronics, furniture, lodging (as in hotels, not primary residences), apparel, luxury (excluding jewelry) and restaurants.

The deepest bucket by far: restaurants. In 2007, U.S. consumers spent $390 billion at eateries, representing nearly 43% of their overall discretionary spending. Electronics, at $141 billion, or 15.5% of discretionary dollars, came in second, followed by furniture and apparel.

In the last three years, the relative dollar-split among all eight buckets hasn't changed much. The most dramatic year-over-year downward shift--nearly a full percentage point--came in the furniture category, which accounted for $113 billion, or 12.4% of discretionary spending in 2007, a year which saw home foreclosures jump 79% from 2006.

Still feeling bad about your budget? Keep this in mind: Last year, U.S. consumers spent $907 billion on discretionary items. That's roughly equivalent to the gross domestic product of Australia, the 14th richest country in the world.

In a recession, it's hard to remember that everything is relative.