“Everything costs more than it used to” is true in dollars. But it is a more interesting question once you adjust for inflation and look at how households actually spend their money. Some parts of the budget cost about the same as they did in 1985. Others have nearly doubled. And a few have fallen sharply.
The Bureau of Labor Statistics has run its Consumer Expenditure Survey continuously since the early 1980s, so we can compare the average American household’s budget in 1985 with the most recent full year of data, 2024.
The headline numbers
| 1985 | 1985 in 2024 dollars | 2024 | |
| Average yearly spending | $23,490 | about $68,480 | $78,535 |
| Average yearly income before taxes | $25,127 | about $73,250 | $104,207 |
| Monthly spending | about $1,958 | about $5,707 | about $6,545 |
Source: BLS Consumer Expenditure Surveys, all consumer units (via FRED). Inflation adjustment uses the CPI-U annual averages for 1985 and 2024 and is our calculation.
After inflation, the average household spends about 15% more than in 1985, while average before-tax income is about 42% higher. In other words, households are better off on average in real terms. So why does it feel harder? The answer is in where the money goes.
Category by category
| Category | 1985 (in 2024 dollars) | 2024 | Real change |
| Housing | about $20,660 | $26,266 | up about 27% |
| Transportation | about $13,370 | $13,318 | about the same |
| Food | about $10,140 | $10,169 | about the same |
| Health care | about $3,230 | $6,197 | up about 92% |
| Entertainment | about $3,410 | $3,609 | up about 6% |
| Clothing and services | about $4,140 | $2,001 | down about 52% |
| Everything else | about $13,530 | $16,975 | up about 25% |
“Everything else” includes personal insurance and pension contributions, education, personal care, cash gifts, reading, alcohol and tobacco.
What changed and why
Housing: the biggest real increase in dollars
Housing costs about $5,600 more a year in real terms than in 1985 and takes a bigger share of the budget, about 33% today versus 30% then. Home prices have risen much faster than incomes, and rent has followed. Property taxes and home insurance have also climbed, especially in recent years.
Health care: nearly doubled
Health care spending has risen about 92% in real terms, from under 5% of the average budget in 1985 to about 8% today. That includes higher insurance premiums, more prescription drugs and more medical services. For older households, the share is even larger.
Food: about the same
Despite what it feels like at the checkout, the average household spends about the same on food in real terms as it did in 1985. Many basic grocery items, such as eggs, bread, chicken and sugar, cost about the same or less after inflation. Beef and coffee are the notable exceptions. Households also split their food money differently, with more spent eating out.
Transportation: about the same, but different
Real transportation spending is almost unchanged. Cars cost more and are financed longer, but they last far longer and use less fuel per mile than 1980s cars.
Clothing: cut in half
Clothing is the clearest example of something that became much cheaper. Real spending on apparel has fallen by about half, as imports and large retailers pushed prices down.
New categories that did not exist in 1985
A 2024 budget includes things a 1985 household did not pay for at all: cell phones, home internet, streaming services and software subscriptions. Meanwhile, some 1985 costs have largely disappeared, such as long-distance phone charges, film developing and encyclopedia sets.
A few everyday prices, then and now
Budget categories tell the big story. Individual prices bring it to life. Using BLS average price data, here is what some familiar items cost in January 1985, what that equals in 2026 dollars, and what they cost in August 2026:
| Item | January 1985 | 1985 price in 2026 dollars | August 2026 |
| Dozen eggs | $0.75 | about $2.30 | $2.27 |
| Pound of white bread | $0.55 | about $1.70 | $1.82 |
| Pound of ground beef | $1.28 | about $3.95 | $6.92 |
| Pound of ground coffee | $2.59 | about $7.96 | $9.30 |
| Gallon of regular gasoline | $1.15 | about $3.54 | $4.20 |
The same pattern shows up: basics like eggs and bread cost about what they did in real terms, while beef, coffee and gasoline cost more. See our full guide to grocery prices then and now.
Two households, 40 years apart
Picture a typical household in 1985. They earn about $25,000 a year, spend about $590 a month on housing, $290 on food, $380 on getting around, and about $90 on health care. Their phone bill includes long-distance charges, they buy film for the camera, and nobody in the house pays for internet or a cell phone.
Now picture the typical household in 2024. They earn about $104,000 and spend about $2,190 a month on housing, $850 on food, $1,110 on transportation and $520 on health care. They pay for phones, internet and a few streaming services, but they spend far less of their budget on clothes.
In today’s dollars, the 2024 household earns more and spends more. But more of every paycheck goes to the two things that are hardest to cut: keeping a roof overhead and staying healthy.
Why it still feels harder
If average incomes have risen more than average spending, why do so many people feel squeezed?
- The costs that rose most are the hardest to avoid. Housing and health care are necessities. You can buy cheaper clothes, but not a cheaper heart procedure.
- Averages hide differences. Households in expensive cities, renters and people with high medical costs have seen much bigger increases than the average.
- Income gains were uneven. Average income is pulled up by higher earners, so the typical household’s gain is smaller than the average suggests.
- Big fixed costs came to dominate. Housing plus health care now take about 41% of the average budget, up from about 35% in 1985, leaving less room for everything else.
What this means for people 40 and older
If you are planning retirement, the two categories that grew fastest since 1985, housing and health care, are also the two that matter most in retirement. Plan for both to keep rising faster than general inflation.
If you are helping adult children, this comparison explains why their experience differs from yours at the same age. Housing and health care simply take a bigger share of a young family’s budget today.
If you want to lower your own budget, focus where the money is. Paying off a mortgage, downsizing, shopping Medicare and insurance plans every year and cutting unused subscriptions will usually do more than clipping coupons.
How your own budget compares
Try this quick exercise:
- Add up your spending in each category for the last 12 months.
- Divide each category by your total to get its share.
- Compare your shares with the 2024 averages: housing 33%, transportation 17%, food 13%, health care 8%.
If your housing share is well above average, that is usually the single biggest opportunity to free up money.
Frequently asked questions
How much did the average household spend in 1985? About $23,490, according to the BLS Consumer Expenditure Survey. That is roughly $68,500 in 2024 dollars.
Was life cheaper in the 1980s? Some things were cheaper relative to income, especially housing and health care. Others, such as clothing and many foods, cost the same or more back then after inflation. On average, households today spend and earn more in real terms.
What has gone up the most since 1985? Health care spending has risen the most in percentage terms, nearly doubling after inflation. Housing has risen the most in dollars.
What has gotten cheaper since 1985? Clothing, many electronics and several basic foods have become cheaper after adjusting for inflation.
Sources
- U.S. Bureau of Labor Statistics, Consumer Expenditure Surveys, all consumer units, 1985 and 2024 (via FRED: total expenditures, housing, food, transportation, health care, entertainment, apparel and income before taxes)
- U.S. Bureau of Labor Statistics, Consumer Price Index (CPI-U) annual averages
- U.S. Bureau of Labor Statistics, Average Price Data (via FRED)
Figures are national averages. Inflation adjustments are rounded approximations. This article is general information only.
