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 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. [to top of second
column] |
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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