Food is the 3rd largest after-tax expense in the U.S and Canada, exceeded only by shelter and transport costs. Canadians spend 11% of after-tax income on food1 and the U.S. is similar at 10%. So don’t focus all your efforts on small expenses such as your $2 coffee until you optimize shelter, transport and food spending.
Food spending relates to your habits. These include your cooking habits, shopping habits, food management habits (leftovers), and even your social habits. Tiny spending decisions add up over time to make a big difference.
Here are 5 tips to spend less on food, from a guy who devours over 3000 calories each day for less than $200 CAD per month.
Table of Contents
1. Monitor and Limit Food Waste
The average human in Canada wastes 79 kg (174 lbs) of food each year, while the average American wastes 59 kg (130 lbs) per year2. That’s money in the garbage.
Planning and robust food-management habits will help you spend less on food. Plus, you’ll help the environment. Food consumption – especially meat – results in Nitrous Oxide emissions.
- Plan out your meals before grocery shopping. Buy only what you need for that week of meals;
- Look at the expiry dates when shopping to plan groceries based on your expected consumption;
- Keep the fridge free from clutter. Put the oldest stuff up front. It’s hard to forget about food that stares you in the face every time you open the fridge;
- Be careful buying perishable items in bulk;
- Eat the leftovers. If you can’t, freeze them; and
- Make a Frankenstein stew or chilly to use vegetables or meat nearing expiry.
2. Don’t Shop While Hungry
After the gym or cycling, I crave high calorie foods. If I shop on an empty stomach, I’ll grab cheese, ground beef and a baguette. I make a point of avoiding the grocery store while hungry rather than relying on discipline.
This is an example of managing your environment. It’s not that disciplined people exercise more willpower. They instead structure their environment to avoid tempting situations. Make good tasks easier to do, and engineer obstacles for bad habits. This is covered well in this post by James Clear – the author of Atomic Habits.
3. Eat Out Less, Cook More
The pandemic showed you how much you can save by eating at home. Cooking your own food is cheaper than eating out. More importantly, it’s healthier to cook at home. And healthy food increases your energy, mood and cognitive function.
You can figure out how much you spend on food by conducting an expense audit. You sift through two months’ worth of debit/credit card statements and categorize expenses. You can use this expense audit tool to make things easier for you. It breaks out restaurant eating, vs groceries.
Frequently grabbing fast food or eating out at restaurants forms habits through sheer repetition. Your habit will be to pay for convenient meals.
Habits are hard to break, but you have to buckle down to build and reinforce new replacement habits. To do so, you can alter your environment to make it harder to eat out and easier to cook at home.
Here are some ways you can build new habits:
- Start prepping meals for the week on Sunday night;
- Write out your intended dinners for the week. Place the list of written meals on your fridge and look at it daily. The negative emotions of guilt and shame will motivate you to follow through.
- Buy food for these meals on the weekend. This will trigger loss aversion – you don’t want to waste money when the stuff in the fridge goes bad.
- Tell your co-workers that you’re no longer eating out for lunch. The social pressure will pressure you into keeping your word.
At $10 per meal, you’ll blow through $200 per month if you buy lunch every work day. The average restaurant dinner is roughly $50 per person. So you’ll spend over $400 per month if you eat at a restaurant every weekend and buy lunch every work day. Add to that your grocery bill, and your spending tons of money on food.
Socializing revolves around food, as it has for thousands of years. It’s too easy to grab a bite to eat with friends’ twice per week, adding up to hundreds of dollars a month.
Instead of eating out, try changing the group dynamic. Invite people to your house, where five people can eat for the price of one. You can suggest bringing lunch to the park next time, where you can eat your packed lunch.
4. Understand the Opportunity Cost of Food Spending
By making a purchase, you give up the opportunity to use that money elsewhere. The value of the next best use of your money is called the opportunity cost.
The global stock market has provided a 7.3% return (nominal) since 19003. It’s reasonable to expect a future long-term return of 7.3% annually. And it’s easy to do this via globally diversified indexed funds.
Spending today comes at the opportunity cost of future wealth. Here are some examples:
- Eating at restaurants for $100 per week, you lose the opportunity to have $324,000 in 25 years.
- Eating your $10 lunch for 220 workdays per year will result in the lost opportunity for $143,800 in 25 years.
You’ll be way better with money if you view purchase decisions through the lens of opportunity cost. This powerful concept applies to all decision-making in the face of scarce resources.
5. Buy Staples & Cook From Scratch
I need 3,000 calories per day, so I focus on key staples such as rice, almonds, beans, milk, vegetables, fruit, chicken, eggs, nuts and potatoes. These are both cheap and healthy.
You could eat for less by grabbing frozen pizzas. Even value picks from McDonald’s may cost less. But your health wealth would eventually fall apart. These staples aren’t the cheapest way to eat, but they are the cheapest way to eat healthy.
Balance Your Valuable Time
Cooking at home consumes time. To overcome this challenge, I cook in bulk and eat of the same meals over and over. It’s boring, and isn’t for everyone. I don’t mind, because I get six meals for one hour of cooking time. Plus, as an index investor, I’m used to boring.
Consider the value of your time. Higher-income folks may be better off using services that deliver healthy meals to their door to save the time associated with cooking and dishes. Humans tend to overvalue money and undervalue time.
6. Perimeter Shop
Most key staples are found on the outside of the store – the perimeter. Vegetables, raw meat, bread, eggs, milk, and nuts. This food is healthy and relatively cheap unless you eat organic.
The inner aisles are mostly filled with garbage. Cake mix, sauce, sugar-filled cereal, 2L bottles of pop, chips and frozen pizzas. This stuff may be cheap, but it will destroy your energy and your health wealth.
It’s not black and white. Some key staples exist in the interior aisles, including rice – the mother source of frugal complex carbs. On the opposing side, you’ll still find some garbage along the perimeter.
The deli section, perogies, ice cream and frozen dinners live on the perimeter. Avoid these. Don’t let your sneaky brain treat “the perimeter” as a black and white rule that can be used as an excuse to buy garbage.