How do you make a budget for groceries?

Grocery Budgeting Guidelines

by Gary Foreman

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Dear Dollar Stretcher,
I am looking for someone to tell me how to lower the cost of my family's groceries. I have no idea as to how to even start. Any suggestions?
Angel S.

Angel asks a good question. For most of us, food is a large part of our monthly expenses. Unfortunately, it's hard to compare your spending to what other people spend. Every family has different eating, shopping and health habits.

Where you live makes a difference and the number and age of your family members makes a difference, too, so comparing your family to others probably won't help. But you can analyze what's going on in your home and make adjustments. Find out how much you're spending now and where you're spending it.

Begin by thinking of all the places that you buy food. Naturally, your grocery store. But there's also the convenience store. And restaurants. And warehouse clubs. And fast food outlets. Perhaps a cafeteria at work. Oh, and don't forget the cash that goes for coffee and snacks. You'll probably need to get a couple of weeks worth of expenses to get a good idea of what's happening. You don't need anything fancy. Just a sheet of paper and a calculator will do.

Once you have a fairly complete record of your spending it's time to see where your money goes. Begin by looking for surprises. Maybe you didn't realize how much goes for snacks in the company cafeteria. Or maybe you depend on the fast food window more than you thought. In any case, surprises present you with an opportunity for savings.

Next, take a look at the numbers and see what's generating the largest portions of the bills. Think about those categories and try to understand what you're trying to accomplish with those purchases. Then consider alternate ways to meet your goals.

For instance, some people include a lot of household cleaning products in their grocery purchases. The goal is a clean home. The mark-up on these products is huge. Most are made from a very few common, low cost ingredients. Consider making your own household cleansers. Or if you're not comfortable with that, find a janitorial supply store. You'll be buying the same basic products. Some are even better. Let's face it. If professionals clean toilets five days a week, they're going to find the easiest and cheapest way to do it. Buy where they do.

You may find that fast foods or convenience items are a big part of your food budget. Why do you buy them? It's probably either because you're short on time or not confident in your cooking skills. If it's time, consider learning about freezer meals. They're becoming very popular with busy people. Instead of making just one dinner, you make three or four at the same time. One for tonight and the rest go in the freezer. It's easier and cheaper to pull a freezer meal out than to buy fast food. Healthier, too.

If your cooking skills are meager, consider taking a cooking course. Or buy a cookbook that's designed for beginners. Cooking skills could pay big dividends.

Some families spend a lot on meats. If that's the case you'll want to shop around and learn about cheaper alternative cuts. Ask questions at the butcher shop. Buy as much as possible when sales occur. A good sale that allows you to stock up on a favorite cut could be worth a special trip to a second grocery store.

Related: Smart Strategies for Saving on Meat & Poultry

One profit-maker grocers have been pushing are specialty foods. Vegetarian, low-fat, organic and other uncommon items are increasingly popular. But if you're going to make a commitment to special items, you owe it to yourself to find other places to buy them. Your grocery store will almost certainly be the most expensive place. Think about where the food comes from on it's way to your grocer. You'll probably find alternative sources that are cheaper.

Finally, a grocery price book is a great (and cheap) tool. It's just a loose leaf notebook that has one sheet for each frequently purchased item. While you're in the store make a note on the appropriate sheet when you've found a low price. Mark the date, store and price per unit. After a while you'll be able to match the store's "sale" price to your book. Some sales are better than others. When you've found a good deal stock up. If not, only buy the minimum necessary.

Your grocery budget is a great place to find savings. Only housing takes up more of your income. And it's not easy to reduce your housing expenses without significantly changing your lifestyle. You can gradually reduce your grocery budget and actually live better.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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