When budgeting, people often ask “what should my food budget be?” Unfortunately, food budgets are not one size fits all. We all have different needs so the answer is dependent on variables like the number of people in your household as well as their age, location, income, eating habits and meal schedule. So we set out to help you answer the question based on your unique circumstances.
Some expenses are the same every month, which makes them easy to anticipate and plan around. On the other hand, food expenses fluctuate which means you need flexibility in your budget. Follow these tips to build a food budget that is easy to follow and repeat every month.
How to Create a Food Budget
- Review What You Spent in the Past
- Separate Groceries and Dining Out
- Create a Food Budget Range
- Choose a Strategy and Track Your Spending
1. Review What You Spent in the Past
The best place to begin your food budget is by looking up how much you’ve spent at the grocery store over the past few months. Note the lowest and highest amounts you spent and then find the average.
Is your spending somewhat stable from month to month? If not, why?
Holiday and special event spending can throw off the budget considerably, so it may help to look at months that don’t include those variables.
2. Separate Groceries and Dining Out
One area that tends to confuse budgeters is deciding whether dining out should be counted as part of their food budget or entertainment budget. The answer depends on how much dining out you typically do and whether or not it is essential to your lifestyle.
If you rarely cook at home, and dining out is a significant portion of your overall food expenses, it makes sense to include that in your food budget. However, if you eat out less frequently, it can make more sense to treat dining out as a non-essential entertainment expense.
Many people decide to revamp their food budget with the intent to cook more and eat out less. So if that is your plan, update your budget accordingly.
3. Create a Food Budget Range
Food costs and needs often fluctuate. Most people don’t buy the same groceries over and over again, or have static food needs. The larger your household, the more variation you may see.
When you create your food budget it’s best to create a range to accommodate those variables.
Find the Minimum Amount
To find the lowest amount you should realistically be spending on groceries each month follow the USDA guidelines.
Every month the USDA puts out a Cost of Food Report and creates a Thrifty Food Plan. The report notes the current cost of food and data and determines the minimum amounts necessary to buy healthy, nutrient-dense food for one person per week and per month so that government agencies can distribute food assistance.
The estimates are divided by age and gender. Using those numbers as a guide you can calculate your total monthly food minimum for your household.
Source: https://www.fns.usda.gov/cnpp/usda-food-plans-cost-food-reports-monthly-reports
Find the Maximum Amount You Can Afford
To find the highest amount you can afford, use the 50/30/20 budgeting rule. The rule states that 50% of your total monthly income should go toward needs, 30% toward wants and 20% toward savings.
Needs make up 50% of your monthly income and you’ll need to factor in all of the basics in order to see how much can be allocated to food costs.
Needs include:
- Housing
- Utility Bills
- Other essential monthly bills
- Personal Care Items
- Household products
- Food
By subtracting your housing payment, utility bills, personal care and household expenses from 50% of your income you’ll determine how much you can budget for food.
In 2020, U.S. consumers spent an average of 8.6 percent of their disposable personal income on food. Typical spending can range from 5 to 15% of your monthly income.
If your available food budget is less than the USDA minimum in the Thrifty Food Plan, you might be eligible for food assistance in your community.
4. Choose a Strategy and Track Your Spending
Once you have a food budget range, choose a strategy to track it. Options include:
- A budgeting app
- Cash envelopes
- Plan your shopping trips with a maximum spend amount
A Budget app can help by automatically calculating how much you’ve spent on groceries and showing how much money is left throughout the month.
Although a little old school, some people like to withdraw a set amount of cash at the beginning of the month and use it to limit overspending.
Also, if you plan to grocery shop once a week each month, you can subdivide your food budget by the number of grocery trips you plan to take and use that number as a guide each time you go to the store.
At the end of the month your goal is to come at or under the top end of your grocery budget. Any funds leftover can be saved or used to treat yourself the next month.
Find More Ways to Save on Your Food Budget
After determining your usual spending and an ideal spending range for your food budget, you might still want to find ways to save.
- Shop with a list and don’t deviate from it
- Buy items on sale
- Look for off-brand items
- Use shelf stable items in higher quantities that have a lower per/unit price
- Compare prices between stores
- Use a rebate shopping app
- Order groceries for pickup to avoid impulse buys
Grocery pickup and delivery fees are usually under $5 and can help you stick to your list and avoid impulse buys that could take you more than $5 over budget.