University of Illinois Extension
Focusing on food costs
 

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[February 28, 2024]    Have your groceries been eating up your budget lately? If you have noticed the increased cost of buying food, you are not alone. Some current financial wellness challenges are inflation outpacing income, the cost of expenses continuing to rise, and savings levels are lower recently.

Food costs are currently the third highest consumer expense after housing and transportation. From 2018 – 2022, transportation costs were the only expense category to outpace food increases according to the United States Department of Agriculture (USDA).

Inflation affecting purchasing power

When the general cost of goods and services rises, this is called inflation. Another way to explain inflation is when the basic cost of living increases, reducing an individual’s purchasing power. Inflation is typically measured by the Consumer Price Index or CPI. The U.S. inflation rate for 2023 was 3.4%, which is still higher than the Federal Reserve’s target rate of 2%, but much lower than the 8% inflation rate experienced in 2022.

The last few years have shown noticeable increases in the cost of living, and unfortunately, average income is not increasing at the same rate. According to the Bureau of Labor Statistics, 2021 -2022 average income before taxes rose by 3.7% and average annual expenditures rose by 9.1% and 2021 – 2022 average income before taxes rose by 7.5% and average annual expenditures rose by 9.0%. On average, living expenses are outpacing income based on the data from 2022. So, even if you received a salary increase, it was likely not enough to account for the increasing cost of living. This means that for most people, spending ability just became more restricted. So, if you feel you are struggling financially, you are likely not alone. Even if you do not feel like you are struggling to pay your bills, you may not be content with your current financial state if you are not on track with your financial goals and expectations. Whether you desire to build an emergency savings account or are focusing on preparing for retirement, your current expenses may make it challenging to stay on track.

According to the Bureau of Economic Analysis, the level of savings as a percentage of disposable personal income is trending lower and is currently around 3.7% as of December 2023 since the spike in savings in 2020. This may indicate that people are using their savings to compensate for the increased cost of expenses, but relying on savings may not be a long-term solution.

Increasing food costs

The USDA provides a Food Price Index Forecast and food prices are predicted to increase by 1.3% in 2024. The cost of food at home is predicted to decrease by 0.4%, and the price of food away from home is expected to increase by 4.7%. After the sharp increase in the cost of all food of 9.9% in 2022 with an increase in the price of food at home of 11.4%, the cost of groceries has risen rapidly over the last few years. The USDA also provides monthly food plans for the average cost of food at home at three levels: low, moderate, and liberal. This cost of food at home guide https://www.fns.usda.
gov/cnpp/usda-food-plans-cost-food-monthly-reports  can give you an idea of where to start when deciding how much to budget for groceries.

Strategies for reducing food costs

As the cost of eating out is predicted to rise in 2024, eating at home may be more economical. To assist with meal and grocery planning, I have created a basic tool to support those interested in strategies for reducing food costs.

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This grocery planning booklet https://issuu.com/uiucext/docs/
grocery_budget  guides you in creating an awareness of your food spending habits and working towards making some positive behavior changes with food spending.

To start, it is helpful to set a goal. Some potential grocery goals may be reducing food waste, cutting grocery costs, or paying attention to portions. As discussed in a previous post, the average U.S. family of four wastes about $1,500 in uneaten food every year. Please remember this when you throw out food because it impacts your budget. Some ways to cut grocery costs are to use what you have on hand, shop with a list and stick to it, pay attention to unit costs when comparing prices, and plan to eat leftovers. Paying attention to portions can help too, so meal plan for the needed servings, store extra ingredients for future use, and use food preservation methods for extra servings.

Make a specific actionable goal with a timeline to achieve your goal. The Grocery Planning booklet is intended to be a four-week grocery challenge, where you take some time to plan both your meals and your grocery expenses. After the four weeks, you can take some time for reflection to see what you learned from tracking your food expenses. This reflection can also guide you on what new goals to set for yourself going forward. If you see behaviors, like going out to eat more than you planned or budgeted, it may be worth focusing on changing those habits that keep you from meeting your financial goals. Maybe you were successful in shopping with a list each week, but now you want to start trying to plan your ingredients more strategically. Find ways to stretch your grocery budget that work for you!

Cutting grocery costs takes time and consistent dedication. Being mindful of how you spend your money can help you focus on your financial well-being.

References

Consumer expenditures - 2022. U.S. Bureau of Labor Statistics. (2023, September 8).

Mahlandt, J. (2023, May 10). Spring into Food Savings. Finding Financial Balance.

Personal saving rate. Personal Saving Rate | U.S. Bureau of Economic Analysis (BEA). (2024, January 26).

St. Louis Federal Reserve. (2024, January 25). Personal saving as a percentage of disposable personal income. FRED.

The United States Government. (2024, January 11). December 2023 CPI report. The White House.

United States Department of Agriculture. (n.d.). Food Loss and Waste: Consumers. USDA.

United States Department of Agriculture. (n.d.). Food price outlook. USDA ERS - Food Price Outlook.

United States Department of Agriculture. (n.d.). USDA food plans: Monthly Cost of Food Reports. Food and Nutrition Service USDA.

[Jamie Mahlandt, University of Illinois Extension, Financial Educator]

 

 

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