When it comes to the family budget, think about two days of the week: Friday and Saturday. That’s when the entertainment budget begins to burn holes in your pockets.
Sure, the weekends are fun, but they can really wreck havoc on a family budget.
Just look at Monday through Thursday. That’s when we pack a lunch and head straight home after work. But Friday rolls around and we dash right off to happy hour and begin to spend our discretionary funds. By the end of the weekend, we’ve gone out to dinner once or twice, hung out at a local watering hole or taken our partners out dancing or to the theater. On Saturday, we attend a sporting event with the family during the day and hit the movies at night. Fun, fun, fun. Spend, spend, spend.
Ironically, what we spend on necessities: Food, clothing and shelter, are items with slim profit margins. But the money we toss away without a thought — entertainment — is largely spent on industries with enormously handsome profit margins.
To learn more, try this trick: Take out your paycheck in Monopoly money and start making piles to represent where the dollars are going each month. You could be surprised.
By averages you will find, says financial consultancy CreditLoan, the average American family spent $51,100 out of earnings of $63,784 – the difference going to Uncle Sam or to state and local governments in the form of taxes.
Out of that $51,100 the average family spends – in data taken from year 2013 – the largest chunk of change, by far, goes to housing. An average of $17,148 is spent on shelter, almost twice the second most expensive item on the list, transportation.
American spend an average of $9,004 each year getting from place to place. We then spend $6,602 on food, $5,528 on pensions and insurance, $3,382 on “other” and $3,313 on health insurance. We then spend what looks to be a modest $2,572 on entertainment. But the numbers here are deceiving.
In fact, we spend more on entertainment than we do on clothing, which averages $1,740 in spending per year. But there are problems with the entertainment line item. We spend, for example, $2,625 per year eating away from home – at restaurants. Yes, you have to eat, so that’s not considered entertainment. But some of the expense of eating away from home is clearly a frivolous expense, ipso facto, entertainment. We could eat at home and save a bundle.
Restaurant prices have long been the bane of the American family budget. Average price of a restaurant meal per person in New York City is $48.56, about $8.03 above the average nation-wide, according to the Web site Zagat. In fact, the average tab, including beverages and the tip, runs to $112.49 in New York. Nationally, a restaurant meal costs $32.60 on average, while the per person tab averages $66.81 in the United States, Zagat says.
Some estimates put restaurant eating at 14 percent of our annual expenses – that’s almost a fifth of what we spend each year, going to a line-item that is noted for extraordinary profit margins.
Therein lies the moral of this story: The profit margins for shelter and for heat and electricity – very necessary items – are very low. But the profit margin for entertainment – are extraordinarily high. You would think it would be the opposite. Since we don’t need it, why do we overspend? On the other hand, we need shelter, but we budget that with a very tight fist.
Now look at the category labeled “other expenditures.” This, too, has some overlap with entertainment, given “other” includes gift giving – and that includes expensive electronic gadgetry, like a PlayStation or an Xbox, or a home stereo system.
In fact, that modest $2,572 entertainment line in our budgets honestly runs much higher with most of the eating out budget and the “other” items could be lumped in with entertainment.
After all, you can feed a family of four for $146 to $289 per week, according to USA Today. That means the tab for one restaurant meal for four people on average runs $130 to $267.24, which is near or better than the cost of feeding four people for a week if you shopped at a grocery store.
My suggestion: Take a parent’s point of view. Parents know the value of entertaining their children, because childhood is about play and play includes entertainment. Sports and theater, to name two items, are valuable parts of our education when we are young.
On the other hand, a parent thinks this way: I could spend $32 on the movies and entertain two children for three hours. Or I could spend $20 on a Frisbee and entertain four children for two hours – and that Frisbee is still available in the future, as well.
This means, dollar for dollar, pound for pound, nothing in the history of mankind has ever come close to the entertainment value of a good, old-fashioned television set.
With the advent of the television in the 1950s, the average family could afford to watch the world’s best entertainers without leaving their living rooms. Even the great, large-screen systems available now and the home-entertainment sound systems give hours of entertainment for the dollar. This is a deal on the order of public schools. You can’t beat it with a stick.
Television, by comparison, shows you the incredible profit margins we allow for entertainment.
Let’s start with the price of going to the movies. A college professor at the University of California, Irvine, in fact, did the math. It costs an average of 90 cents for a theater to make a tub of popcorn and the average price for a customer is above $8.00, the professor found. ($8.15 to be exact.) It costs the theater 51 cents to hand you that soda, including the cup, the lid and the straw … and the average price for the customer is $6.31 for a large soda.
Candy prices fell into step with those prices. It costs $2 for the average box of candy and the markup was over 100 percent. The average price for candy was $4.25 per box, the professor found.
With those prices, a family of four could watch a movie at home for 90 cents time four ($3.60) plus $1.80 for two tubs of popcorn. You have to add in the cost of the television divided by the thousands of hours that television will run and add in the cost of the television service – the cable or the satellite service – which you also divide by how many hours you have that service operating. This ends up as roughly $5 for a family to entertain itself at home, snacks included. For that, you could not even buy one ticket at the local cinema. It could be even less once you learn more about saving on your entertainment packages.
It turns out, pricing is an opportunistic phenomenon. If the opportunity exists for prices to go up, then they will.
Strangely, television has made major sporting events accessible around the world, but similarly, the price of attending a sports event has also gone through the roof since the invention of television. The Washington Post points out that the prices of a ticket to a sporting event has risen 344 percent above and beyond inflation since 1957 – just about the time television became an option for the average family.