Harry Dent is a demographer and writer. He recently wrote a book The Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019.
The thesis of this book is that global demographics strongly suggest that overall consumption—which is 70% controlled by individuals—will decrease over the next five years because more people are aging out of the workforce than are entering it.
Dent tells an interesting story of U.S. demographics that is worth repeating here. The U.S. Bureau of Labor Statistics has created the Consumer Expenditure Survey. This survey measures how people spend in more than 600 categories over various ages. It paints an interesting picture of both what people buy, and when they are most likely to buy it.
Here is an example of an average economic life of a baby boomer according to this survey:
- Age 18 – graduate from high school
- Age 22 – graduate from college
- Age 27 – get married
- Age 28-29 – first child is born
- Age 31 – first home purchase
- Age 37-40 –largest house is purchased
- Age 46 – highest spending on furniture and the highest level of overall spending
- Age 51 – highest spending on college costs
- Age 53 – highest spending on autos
- Age 60 – highest spending on hospitals
- Age 64 – highest average net worth of an individual
- Age 65 – highest spending on vacation and retirement homes
- Age 70 – highest spending on cruises and cruise ships
- Age 77 – highest spending on prescription drugs
- Age 84 – highest spending on nursing homes
The statistics suggest that wealthier individuals tend to reach many of these milestones a few years later than the ages presented here. This is because the wealthy tend to marry and start families a little later.
Think back on the spending that you have done throughout your life. Is your experience close to the spending milestones above?
~ Allyn Hughes, CFP®, ChFC®, CLU®, CAP® — Brooks, Hughes & Jones Wealth Advisors – Tacoma, WA