A budget is a helpful way to meet financial goals and easily track spending, especially with bills like electricity. Electricity bills can accumulate quickly and be costly. For example, in 2020, as a side effect of the pandemic and the increased time spent at home, more people than ever were using their heating and cooling systems, laptops and desktops, appliances and lights. For many consumers, this surge in residential energy consumption resulted in an increased electric bill.
Given that many workplaces continue to operate remotely and many consumers are still spending more time at home, how can consumers budget for their average electric bill?
How much is the average electric bill?
As of 2019, the average U.S. household spent $115.49 per month on electricity, with the average U.S. resident consuming 877 kilowatt-hours per month, according to the U.S. Energy Information Administration.
Average electric bill costs differ by state, and some states are more affordable than others. Missouri is the most affordable state to power your home, while Hawaii is the most expensive, according to the EIA. Also, according to the EIA, electricity rates are determined by multiple factors including rates charged by power plants, fuel, weather, demand and regulations.
Like a water bill, the rate of consumption and appliance efficiency are fundamental factors in how much an electric bill costs. Other factors, including the size and physical characteristics of your home, influence the overall cost. From an energy perspective, living in a bigger space, such as a single-family home, will usually cost more than living in a smaller space, like an apartment. Running various appliances, notably those that are not energy efficient, can also cause your electric bill to increase.
How can I budget for my electric bill?
The 50/30/20 rule is a standard budgeting approach that guides users to spend 50% of their monthly after-tax income on needs, 30% on wants and 20% on savings and debt payments. An electric bill is considered a "need," so users of the method would allocate 50% of income to essential utilities, including electricity, and other necessities like food, housing and transportation.
Here's a hypothetical example of how the breakdown could look for someone with a $2,500 monthly income:
$1,250 for utilities (including electricity), internet, rent, groceries and other needs.
$750 for new clothes and dinner with friends.
$500 toward savings and paying off your credit card.
How to lower your electric bill
If you find that your electric bill is too high, you can lower it in a few ways:
Use appliances and devices efficiently: Minimize energy consumption by maximizing your appliance and device usage. Consider running your dishwasher only when it’s filled up and starting your washing machine only when you have a full load, using cold, rather than hot or warm, water. Also, try consolidating dryer loads to a shorter timespan to prevent the dryer from cooling down in between.
Invest in smart power strips: Certain electronics continue to consume energy even after they're powered off. Some experts say these electronics account for 3%-10% of household energy consumption. A smart power strip shuts down the power to products that aren't in use.
Ask for an energy audit or home performance assessment: Have a local expert come to your home and provide recommendations on how to significantly reduce your energy bill, become energy efficient, identify issues with comfort, review your bills, and assess the safety of your home. Check Energy Star, a government-backed symbol for energy efficiency, and utility companies to find someone.