It's a minimalist Monday edition of Optimal Finance Daily, episode 1767, the 80-20 rule for money.

The three ways Americans spend most of their money and how you can save more by Kyle Kowalski of Slow.co.

And I'm your host and personal finance enthusiast, Diana Mariam. Happy Monday!

Let's jump right into today's post to start the week as we optimize your life.

The 80-20 rule for money. The three ways Americans spend most of their money and how you can save more by Kyle Kowalski of Slow.co.

Is it possible that the 80-20 rule can apply to every area of your life, including how you spend money?

If you're unfamiliar with the 80-20 rule, here's a quick definition.

The Pareto principle, also known as the 80-20 rule, the law of the vital few or the principle of factor sparsity, states that for many events, roughly 80% of the effects come from 20% of the causes.

I've mostly heard of the 80-20 rule applied to business and work.

80% of your revenue comes from 20% of your customers, or 80% of your results come from 20% of your work, etc.

Naturally, I wondered if the same rule applies to personal finances and how the average American spends money.

The 80-20 rule for money. The three ways Americans spend most of their money and how you can save more.

The US Department of Labor's Bureau of Labor Statistics, BLS, published their latest release of consumer expenditure data in September 2018.

The survey looks at spending by customer unit, which is defined as, quote,

customer units include families, single persons living alone, or sharing a household with others, but who are financially independent, or two or more persons living together who share major expenses, end quote.

Average expenditures per consumer unit for 2017 were $60,060, a 4.8% increase from the prior year.

But what I find more interesting than the total amount is where all that money spent.

The three largest spending categories are housing at $19,884, which is 33% of the total $60,060, transportation, which is $9,576, or 16%, and food at $7,729 at 13%.

That's $37,189 from those three categories alone, or 62% of total spending.

The report shows 11 spending categories, which means three account for 27% of the total categories.

It's not quite the 80-20 rule, but it's pretty darn close.

62% of consumer spending comes from 27% of the spending categories.

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