Whether eating at home or out on the town, you might be shocked by the amount you spend on food each year. In fact, the average U.S. household spends $7,967 on food every year, according to a recent Bureau of Labor Statistics consumer expenditure survey. That amount —about $664 a month—represents nearly 13% of consumers’ average yearly expenditures and 10% of their income.
Of course the amount people spend on sustenance can vary widely, depending on age, gender, dietary restrictions, and where they live. A smorgasbord of meals delivered, takeout food, snack addictions, and a yen for impulse grocery buys all affect the bottom line. We’re not even talking about the beer that goes with those Funyuns®, the chardonnay perfectly paired with the white cheddar nachos.
Here’s a look at some rules of thumb about how much to spend on food and how to work the cost into your budget.
A Food Budget Benchmark
The U.S. Department of Agriculture offers a series of monthly food budgets that represent the cost of a healthy diet at four price levels: thrifty, low cost, moderate cost, and liberal. These budgets can serve as a benchmark against which you can measure your own.
Cost varies by age, gender, and family size. And the USDA assumes that all meals will be prepared at home. It updates each plan to current dollars every month using the Consumer Price Index for food.
For example, in July 2020, the USDA pegs the monthly cost of food for a woman 19 to 50 years old at $172 for the thrifty plan, $219 for the low-cost plan, $269 for the moderate-cost plan, and $342 for the liberal plan.
The USDA budgets more for couples ages 19 to 50. Each month, they might spend $403 on a thrifty plan, $518 on a low-cost plan, $643 on a moderate-cost plan, and $803 on a liberal plan.
A family of four, with one child age 6 to 8 and the other 9 to 11, might spend $676 on a thrifty plan, $891 on a low-cost plan, $1,110 on a moderate-cost plan, and $1,344 for a liberal plan.
Individuals may use the USDA’s monthly tables to determine a baseline for how much to spend on food each month.
Creating a Personalized Budget
The USDA guidelines can provide a starting point for a food budget, but they don’t take into account all the variables that can affect cost. For example, someone who is unable to eat gluten may have to make room in the budget to buy some higher-cost foods that are easier for them to eat.
Likewise, those who live in expensive cities like New York or Los Angeles or expensive states like Hawaii will also likely find themselves spending more. (In fact, the USDA publishes a different set of food budgeting guidelines for Alaska and Hawaii, where the cost of food can be higher than in the Lower 48.)
When building a personal food budget, you might want to first take a look at past monthly spending on food and compare that number to the USDA food budget guides.
If your spending is much higher, it’s important to determine why. It may be because of unavoidable factors like geography, but it may also stem from discretionary decisions, such as eating out at restaurants. In that case, it may be useful to look for ways to cut back on spending, redirecting money to other goals like building an emergency fund.
Finding Wiggle Room in Your Budget
The USDA’s budgets only take into account food prepared at home, yet a food budget will likely also need to account for restaurant meals. The BLS reports that the average household spends $4,533 a year on food at home and $3,434 a year on food away from home. So while about 57% of people’s food spending tends to be on groceries, 43% is spent eating out.
Eating at restaurants is more costly than preparing food at home, so when looking for wiggle room in a food budget, restaurant spending can be a good place to start making cuts.
Coupons are another money saving option. Grocery stores often offer discounts in the form of coupons, which may be available online or in the grocery store flyer, or may be sent to you in the mail.
Using coupons can help buyers save money at the checkout counter, but before you buy, be sure you actually need the food item. If that box of almond bars isn’t actually necessary, it’s better not to buy it, even with a coupon.
While using an individual coupon may not add up to much savings, using many over time can start to open up space in your food budget.
The same is true of buying store brands, which may be a dollar or two cheaper than their name-brand counterparts. Over time, and multiple purchases, those couple of dollars can add up to big savings.
Finally, the cost of food can vary widely from store to store, so visit different stores to find budget-friendly prices. Some stores may offer certain foods in bulk, such as grains, nuts, coffee, and dried fruit, which can be cheaper than buying the same foods in a package.
Planning a Weekly Menu
Shopping at a store without a plan can be a budget-buster, as it can lead to unneeded purchasing. Avoid this outcome, and stay on track, with a meal plan that lays out breakfast, lunch, and dinner for every day of the week.
Once a menu is in place, check to see what ingredients are already in the kitchen. Make a list of items that are missing and the amounts that are needed. Buy only those items at the store.
Consider planning some meals that have overlapping ingredients as buying ingredients in larger quantities can be cheaper.
Making Food Planning Part of a Household Budget
Getting a handle on how much you spend on food can help you build a larger household budget. Generally speaking, creating a household budget starts by tallying your monthly income after taxes.
Next, total up necessary expenses, including food, rent or mortgage payments, utilities, insurance, car payments, and debt, such as student loan payments. Subtract this amount from your net income. The resulting amount is what is left to cover discretionary spending, such as entertainment, vacations, or a new TV.
This is also the part of a budget where there is room to set aside money for savings or other financial goals, like paying off debt faster. Making cuts to discretionary spending can free up more money to pursue these goals.
There are a number of budgeting strategies that can help you keep track of your spending.
The 50/30/20 Rule
The 50/30/20 rule is a simple strategy for proportional budgeting that was originally popularized by Elizabeth Warren and Amelia Warren Tyagi in their book, “All Your Worth.” This strategy breaks down a budget into three categories of spending. Here’s how it works:
• 50% goes to essential needs. These are necessary expenses, such as rent, groceries, and health insurance.
• 30% goes to discretionary spending. These are fun purchases that you don’t technically need in order to survive.
• 20% goes to savings. The 50/30/20 method separates discretionary spending and saving for financial goals, such as retirement, a down payment on a house, or paying off debt faster.
The 50/30/20 rule is a relatively simple form of budgeting, so it can help individuals keep their eyes on the big picture and avoid getting bogged down in minute details. That said, because it isn’t detail oriented it can be hard to pinpoint problem areas, such as places where overspending occurs.
The Envelope Method
The envelope method seeks to make budgeting more concrete by limiting most spending to cash transactions. It works by allocating a set amount of cash each month to different spending categories, such as groceries or entertainment.
At the beginning of the month, write each category on individual envelopes. Decide how much you want to spend in each category over the course of the month, and put enough cash to cover that amount in each respective envelope.
This method takes discipline. You can only use the cash in each envelope to make purchases in that category. When the cash is gone, it’s gone for the month. That means you can no longer do any spending in that category.
A zero-based budget is one in which you assign each dollar of your income a specific purpose. For example, you may decide to spend $1,000 on rent, $325 on food, $200 on student loan payments, $100 on savings, and so on until there are zero dollars left without a job to do. While this type of budget can take a lot of effort, it can help you think carefully about every dollar you spend and be mindful of setting aside savings.
With your food and household budget on track, you’ll have enough to work toward financial goals, like paying off student loans and saving for retirement.
There’s an App For That
Envelope and spreadsheet averse? A SoFi Money® cash management account allows a look at weekly spending and saving right in the app. After a few months of tracking, you’ll have a better idea how to put purchases into categories that work as part of a bigger budget.
Signing up can take less than 60 seconds.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
The SoFi Money® Annual Percentage Yield as of 03/15/2020 is 0.20% (0.20% interest rate). Interest rates are variable subject to change at our discretion, at any time. No minimum balance required. SoFi doesn’t charge any ATM fees and will reimburse ATM fees charged by other institutions when a SoFi Money™ Mastercard® Debit Card is used at any ATM displaying the Mastercard®, Plus®, or NYCE® logo. SoFi reserves the right to limit or revoke ATM reimbursements at any time without notice.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.