Food and groceries is one area that can be especially tricky for those that are new to budgeting. What percentage of my budget should go to food?
We don’t really know what we spend on food
If you have not previously done a budget, you probably don’t have a real good idea of what you actually spend. I suspect this is one area that frequently torpedos new budgets because we tend to underestimate what we really spend each month on food. Since we haven’t really tracked it, we do a rough guestimate. I get groceries once a week and spend about a $100. So that’s $400 a month and I’ll throw in a little extra for the couple quick stops to pick up perishables like milk, so we’ll budget $450.
But the problem is we didn’t take into account the pizza order on Friday night when we got home from work and were too tired to cook. Then there is going out to eat for lunch a few times a week. Of course we need to stop at Starbucks to get our caffeine each morning. Then there were the impulse buys while we were at WalMart picking up a few things. The kids had to have that box of Ho Ho’s, and well while I was looking I noticed a few other items on sale. Etc. Suddenly that $450 is approaching $700 and at the end of the month we are $250 short. You come to the conclusion that you just can’t do a budget and give up.
How to get a better estimate for food
One simple solution to this is for the next month simply track every dollar you spend on food. Whether it be groceries, eating out, impulse buys, whatever. At the end of the month you’ll have a much better idea of what you are spending. I’ve worked with many people who have done this and been stunned by just how much they are really spending on things like eating out.
This will give you a picture of what you are currently spending, but how do you know if what you are spending is normal for a family your size? That’s a trickier question.
Many budget programs will give you a target percentage of your budget for food. Typically I’ve seen something in the range of 10-15%. For most people those numbers are a good ballpark to start with, but they are just a ballpark number. Percentages also tend to break down as you get to extremes. If you have a million dollar income, then 10% would equate to about $8,000 a month on food. Clearly if you spend that much on food you will be rather large. By the same token if you are making $20,000 a year that will equate to about $160 a month for food. You’ll probably have a hard time making it on that.
I came across a web site a couple of weeks ago that may be helpful in determining what is an appropriate amount to spend on groceries. The USDA has an entire web site with various food guidelines. One of the pages they publish gives suggested food budgets broken down by age and by size of family. You can find these charts at:
They provide totals for a “Thrifty Plan”, “Low-cost”, “Moderate-cost”, and “Liberal cost”. Granted these are US averages. Some areas have higher costs of living than others. Also, your costs may vary depending on your type of diet. If you have special dietary requirements, that may cause your costs to be higher. These totals though seem to give a reasonable benchmark with which to gauge your spending.
What categories should you track?
Should you just have one big category for food? Separate food and eating out? What about things like toiletries?
The important thing is to be tracking. Keep it simple. You want something that will work for you. Personally, we break it down by groceries and entertainment. Groceries includes toiletries, laundry supplies, paper products etc. in addition to actual food. Since we sometimes buy those other things at the grocery store it’s easier to just track them in one category. By the same token keeping entertainment in a separate category allows us to enjoy an evening out now and then, but keep it within reason.
How to stick with it
One of the best ways to make sure you stay on budget once you have realistic numbers for your family is to use the envelope system. Food is an excellent candidate for the envelope system. We use envelopes for groceries and entertainment, but you can match them to whatever categories work for you. The key is when you get paid you take out the amount of cash matching your budgeted amount for that category and place it in the appropriate envelope. If you have a groceries envelope, you then use that money for groceries only. You don’t buy anything else with that money and you don’t buy groceries unless there is money in the envelope. Seeing the cash in that envelope dwindle as you are approach the next pay-day is a very powerful motivator to keep you on budget. When you use cash it will change the way you make purchases.
Take control of your most basic need
Food is one of our most basic needs. Not eating isn’t an option. But there is no reason for it to be a budget buster either. Getting organized in this area was a critical step for us in making our budget work. If you have never tracked your food spending it might take you 2 or 3 months to get a realistic value for your family, but you can do it. It will make a world of difference in helping you succeed with your first budget.
What tips do you use for controlling your spending on food?
Photo credit: The Consumerist (Creative Commons)