Anytime someone comes into my office, and their major pain point is budgeting, food is the first place I start. On one hand, we are fortunate to live in an age where food is readily available to us. With a quick phone call, or even an order placed online, a pizza is on its way to our door. On the other hand, this immediate access to food means we often take advantage of these amenities far more often than we intend to, and more often than we would like to admit.
In 1960 about 75% of the average American family's food budget was spent on groceries to be prepared in the home, with just 25% of that budget being spent on eating out. Eating out was generally reserved for special occasions or celebrations. Fast forward to today and we have officially crossed the tipping point. In 2014, more money was spent on food outside of the home than on food to be prepared inside the home.
Your first thought is likely “but my family only eats three or four meals outside of the home each week, and a couple of those are just fast food”. That may be so, but if you start doing the math you will realize how quickly eating out really does add up. Let’s say for example that a family of four had fast food twice and had a sit-down meal twice. The fast-food meals likely cost that family roughly $30 apiece, with the sit-down meals running $60 or more apiece, depending on drinks, dessert, etc. That comes out to $180 per week, or more shockingly $9,360 per year. And that doesn’t even count eating out for lunch at work once or twice a week, which we are all guilty of from time to time. Without even realizing it our family spent $180 on four meals, while our other 17 meals, plus snacks, were covered by a $200 grocery bill (average family of four). Shocking, right?
Next come gas stations and convenience stores. The same theory applies here, simplicity and convenience win us over. I recently met with a friend of mine and his wife who wanted some advice on budgeting. After going through their budget for the previous year, I found that a huge setback was gas station stops. It might have only been a pop here and a bag of chips there, but over the course of a year, they had spent well over $1,000 on just snacks while on the move.
Some financial planners will advise you to live on as tight of a budget as humanly possible (trust me, I’ve eaten plenty of Ramen), sacrificing joy in favor of building a financial nest egg. I try to take a slightly more moderate approach, recommending that individuals try to make conscious financial decisions. Take time to recognize choices that are taking a significant toll on your finances, and then tone them down. I find that people are far more likely to see long-term success if they take smaller, achievable steps. Maybe you set a goal to eat out only once or twice per week. I think you’ll be shocked at the difference that this will make in your overall financial health.
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Cody Austin
Austin Wealth Solutions