Years ago my husband and I thought we were frugal people. We looked for sales, drove used cars, and otherwise opted out of an extravagant life. However, it somehow missed our attention that we were still living beyond our means.
Since ours was a one-income, self-employed household, we'd never learned how to budget. In fact, we'd kinda dismissed it as being impossible to budget on an irregular income. Credit cards and home-equity loans fooled us into thinking we were doing just fine.
In 2007 we woke up and smelled the debt. Desperate to get right-side up, we made some crazy-to-us decisions: we stopped using credit cards and we learned to spend less than we made. We built an emergency fund and paid for everything in cash. Now eight years down the road, we are freed up to do all kinds of things, like take our six kids to Europe for a month — paid in cash.
Budgets involve a basic comparison of income to expenses. The former needs to be bigger than the latter. It's simple math.
Staying in the black will help you achieve your goals as well as make life a lot less stressful. One of the easiest categories to adjust in your budget is your food spending. Your rent is determined by your landlord, but you get to decide what goes in the grocery cart.
Adjusting our food spending years ago helped us divert money to paying off our debt. Now we watch what we buy so we can save for important things like travel, college, and a house fund.
Budgeting for food costs will help you keep your overall budget where you want it to be. There can be lots of wiggle room there, even if you don't see it right now. Stores vary in their grocery prices. Diets can range from filet mignon to beans and rice. Eating at home is cheaper than dining out. There are plenty of things you can do to create a food budget that works.
Here's how to create a food budget, in four steps.
1. Find out how much you can spend.
If we're really going to have a great food budget, then it helps to have a great life budget. Start with your income. Once you've subtracted your regular expenses (mortgage/rent, utilities, phone, transportation), you'll have a number to work with adjustable expenses like food, clothing, and entertainment.
When first starting out, you might guess at these numbers. After a month or two, you'll have a better idea of what your needs/wants really are for each category.
2. Find out how much you already spend.
Okay, so you've got a number for grocery spending. Let's say $200. Now let's see if this is realistic for the life you've been living. If you track in finance software, you should be able to easily run a report for groceries and dining. If you have no clue, you can check your bank statements. Pay cash? No worries. Just start putting all the receipts in an envelope and add them up after a couple weeks to get an idea of what your current habits are.
If you've been spending $300, then your numbers will not jive. Huh ... that's not going to work, so what next?
3. Compare this to the USDA's nationwide averages.
Are you being extravagant or what? One way to test this is to check the USDA Food Cost Plans for your household's demographic. There are four plans: thrifty, low-cost, moderate-cost, and liberal. If your $300 lands on the liberal end, then chances are good that you can whittle this down.
Since I started tracking with the USDA, our family has always been able to meet or beat the thrifty plan for a household like ours. You can, too.
4. Determine a plan to adjust your food budget.
Once you find a target based on data (yours and the government's), you can make adjustments as necessary. A grocery audit is a wonderful way to see how you can tweak your kitchen practices and squeeze a little more out of those precious pennies. Ask these questions:
- Are you eating out a lot?
- Are leftovers going to waste?
- Are you spending a lot of money on store-bought bread or other staples when you could bake yourself?
- Could you include a few more meatless meals in the week's menu and stay under budget?
Taking a good look at your habits and how you can adjust them will set you up for meeting your budget in the weeks to come.
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While some folks want to talk bad about budgets, the budget is really there to serve you. Think about the big dreams you have, particularly the ones that involve money. A budget will help you see those dreams become reality.
You can get out of debt. You can buy that new car. You can take that big trip — if you plan wisely and make your money work for you.
A food budget is a great place to start.
(Image credits: Jessica Fisher)