How Much $$$ Are We Spending On Tech? We Ask The Experts.
Generally speaking, the government has invented technologies before they become mainstream. Everything from microwaves, to magnets, to the internet, to AI, started off as experiments in the federal governments’ defense research and development. Traditionally, the next adaptors, or first private-sector users of technology, are the people in the most affluent social circles. Who had at-home computers before anyone else? The homes that could afford them. And how much we spend on technology today still correlates to our income. Pew research explains, “Roughly three-in-ten adults with household incomes below $30,000 a year (29%) don’t own a smartphone. More than four-in-ten don’t have home broadband services (44%) or a traditional computer (46%).” This financial constraint not only pressures social interactions, work, and education, but is becoming increasingly tough for low-income households to coordinate all aspects of life. And lower-income households need to pay larger percentage of their incomes to keep up. According to IDC, consumers overall spent approximately $1.7 Trillion on tech in 2020. But those costs are extremely disproportionate to social classes. So how much are we spending per social group, and how much should we budget for technology?
RealMoney reports in the middle of the 2020 pandemic, “NPD estimated that total U.S. consumer tech spend...was up 34% annually during the first week of August, following an 18% increase in July. Notebook sales were estimated to be up 64%, while sales of monitors, routers and PC headsets were respectively estimated to be up 97%, 87% and 127%”. That’s a huge growth in the private sector due to need for technology hardware while quarantining. And technology sales aren’t slowing down any time soon. Trends show that around 75% of consumers’ tech spending will be for mobile phones and computers, but emerging technologies like AR/VR headsets, drones, and smart devices will increase by more than 13% in the next five years. Specifically the IDC predicts, “smart home devices and on-demand services ill make up around 90% of spending on emerging technologies.” Trends point to the fact that consumers predictably increased sales of notebooks, monitors, routers and PC headsets during the pandemic. But those tendencies aren’t slowing down. The majority of consumers will continue to purchase the bulk of their technology on phones and computers, but more and more of their budgets will be weighted towards new hardware. Smart Devices, or any electronic devices that are connected to a network or other devices. Alexa, your coffee maker, or thermostat are likely all smart devices. If they aren’t today, they will be soon. According to the IDC, 90% of your spending on technology will be to upgrade or replace your common consumer products with digitally-connected ones. In the very near future all your things will be smart. So it’s reasonable to say your technology budget for hardware, is your purchasing budget at-large.
Comparatively, businesses are seeing the same trend. If you ask Ken Goldman, who heads Eric Schmidt’s family office, he’ll let you know the trends, “a decade ago oil and gas companies were the stocks with the highest market capitalization. Saudi Arabia’s oil giant Aramco is still more profitable than the iPhone maker, but the top of the market cap table has tilted. Now Goldman notes that all of the biggest market cap companies are tech (the top four U.S. publicly traded companies, to be exact).” Technology is certainly leading our industries and guiding our wallets. This doesn’t stop short with hardware. Technology industry is booming in all directions.
So we spend a lot of our money on technology. In business and our personal lives, we will continue to buy computers, phones, a replace our spring-made toasters with digital smart ones. But how do we best budget for this slow adaptation into full-technology livelihoods?
As a lifelong diligent budgeter, 2021 is the first year where I categorized “technology” separately into my plan. There’s the usual, “healthcare” and “car insurance” allowances, “trips” and “clothes” - among other standard western world budgeting categories. But this year, “technology” included hardware and software I plan to purchase. It includes a new phone and miscellaneous “cushion” amount for accessories or wanted trendy products. It also includes software that has added up over the years. Starting with cybersecurity, a simple package from McAfee is around $30/year. Grammarly is another just nice software platform for personal and business use. It’s about $100 annually. I also like to block email spam. Then there’s a few Apps I plan to purchase for my phone. If you include digital viewing platforms like Amazon Prime or Netflix, you can add up quite a bit of software costs for personal use too. Shockingly, quantifying all my tech purchases, in a way, was liberating.
As technology is seeping into our lives, costs car easily become hundreds or thousands of dollars to “keep up” every year. Sitting down, categorizing, and planning to spend on tech, not only gave me peace of mind that when I do spend, it’s intentional. It also made me prioritize what is important in my physical and digital worlds. It felt comforting to know I had control over these empowering yet omniscient purchases.
Now, I recommend for you to look around your home. You probably have computers, smart devices, phone accessories, some subscription-based software - can you add up how much you spend on technology? Do you think it’s more or less than the average consumer? Do you think it’s more or less than others in your income level? According to American Institute of CPAs Americans spent an average of $166 a month or 17% of their monthly rent or mortgage on technology in 2013. With the explosion of smart phones, cybersecurity attacks, and streaming services in the last five years, we can only assume this number has more than doubled since the study completed. This percentage will only increase in the 2020s more. In fact, the IDC predicts US consumers will purchase $2 Trillion of traditional and emerging tech annually, by 2023. That means the average individual American will be spending over $6,000/year on technology. The average total household income is $60k/year. Time to budget for it? Probably.
As a general rule-of-thumb, it’s best to take inventory of your personal technology expenses, set a budget, cut what you don’t need, and have a clear plan as to what you and your family would like to purchase. As millions of people acquire the newest and best technology, millions more will go without. The best way to know how much spending on technology is right for you, is to be aware and plan for it.