How do I tell if I'm overspending on groceries?

Question

I am wondering if I'm spending more than I could be on groceries. I get this impression because some of the individual items seem too expensive: I end up paying almost the cost of a full restaurant meal for individual ingredients. Granted, the ingredients are in bulk and make many meals, but I still can't get an intuition for how much I should be spending.

In principle, I could simply try to guess how many days I could live off the groceries I bought, divide the total by that, and compare to the cost of eating out. If it's not at least a little bit cheaper, either try harder to find cheap groceries or give up and eat out instead. This doesn't work, since I don't cook often and a lot of the things I buy are snacks or other "luxuries" like ice cream, that I could easily go without. They aren't quite meals that one would live off.

I also tried looking at the distribution of prices, to see if there are any particular items that are responsible for most of my expenses. This didn't work, because unlike what I expected, the distribution does not follow a power law but almost all items appear to be distributed evenly between $2-7, with a few exceptions that are much more but for good reason (it's an item that you would expect to cost that much in the first place).

At this point, I'm stuck. How do I tell which of my groceries am I paying too much for, and should see if there's a cheaper alternative? How do I determine which expensive groceries are not unusually expensive, and stop worrying?

The only possible solution I can think of is to look up the price of each item on the internet, but that would be hilariously impractical. First of all, prices vary widely by location, and second, I don't want to spend ages looking up every single tiny thing I buy.

It seems the root of the problem is that I have no idea how much a given food should cost in the first place, so I can't decide whether it's expensive or cheap when I see the price at the store.

Answer 1

There are sort of two aspects to finding out if you're "spending too much on groceries". One is whether you are paying too much for individual items (i.e., paying $7 for a TV dinner when you could be paying $5). The other is whether the way you allocate your money among different items causes you to spend more than you should overall (i.e., spending $50 on TV dinners when you could be getting the meal-equivalent in ground beef for $30).

The only way to really answer the first question is to start paying attention to the prices of items that you buy, and to the prices of alternative items that you could be buying instead. For instance, instead of just grabbing your usual cereal box off the shelf, you need to look at some of the other cereals and see how the prices compare. You might also want to visit different stores to see how their prices compare.

When doing this, you should also pay attention to the price per ounce (or price per unit, whatever the unit may be). This is often displayed in tiny numbers on the price tags at stores, smaller than the actual price. But the price per ounce is more often what really matters, since it takes into account how much you're getting. A large bottle of olive oil may cost more than a small one in raw price, but it will usually have a lower price per ounce, meaning you get more bang for your buck. For nonperishable items, you may be able to save a considerable amount by paying attention to the price per ounce and looking for the bargains there, which often means buying the bigger containers.

In terms of actually saving money, though, the second question may be more important. To answer that, you need to consider not just how much an individual item costs, but how much of it you buy. When you say all items cost $2-7, do you mean that's the price to buy one of each? If so, you might benefit from tracking not just the cost of one item but the total cost of all the items of that type that you buy. For instance, a box of cereal may only cost $5, but if you eat cereal for breakfast every day, you may go through a box or two a week and spend $30 a month on cereal. In that case, even a per-item price difference that seems small could result in significant savings due to the multiplier effect of how many you buy. It might seem like saving $2 on ice cream is better than saving 50 cents on cereal, but if you only buy ice cream once a month and you buy cereal 6 times a month, you'll actually save more in the end on the cereal.

If you really want to investigate your spending habits, I would recommend keeping close tabs on your grocery spending for a while, say a month or two. Keep your receipt from every grocery trip and enter the individual amounts and item types into a spreadsheet. This might sound like a pain, but unless you buy lots and lots of separate items it's not actually that bad and will take only a few minutes per shopping trip.

Once you have some data, you can analyze it to see where your money goes. Like I mentioned above, you might then be able to see where a brand shift would make the most difference. For instance, if you find you're spending $100 a month on cereal because you buy some fancy kind, then you can make an effort to try some cheaper kinds and see if any are worth switching to. In some cases you might be able to find a store brand that is just as good but costs significantly less.

At the same time, having data could help you make larger-scale adjustments in your spending in different categories --- that is, not just finding a cheaper brand, but cutting down on entire kinds of purchases altogether. For instance, if you spend $100 on ice cream, you could start to reevaluate whether you really need to eat that much ice cream at all. Here you can also get at your issue of "luxuries" versus "real food". You could consider them separately; if you find your spending on "real food" is reasonable relative to what you would spend to eat out, but you still think you're spending too much overall, then it's time to look at the luxuries and see which ones you could cut back on.

Answer 2

The USDA has data that confirms a $10/day per person is a legitimate benchmark. The chart has averages by gender age and family size. It also offers a range using thrifty, moderate, etc, so, given hat you didn't mention what you spend, the data might give you an idea of where you fit. It was interesting to me that when my wife and I went through our 2013 credit card bills, we came out with exactly $10/day each for the three of us.