Chapter 10 – Food Expenses

The latte factor is the unconscious spending on the little everyday things that do not add any value to our lives.” ~David Bach

* Personal Finance Tip: Reducing the amount we spend on snacks and dining out are usually the first places Certified Financial Planners will help you cut food expenses to save more money.

Before reading this chapter, please make sure you’re well aware of how much you’re spending on food costs. If you don’t know, you should start a 30-day Spend Plan challenge mentioned here ( so you can see how much you’re spending on food in a typical month. Most Certified Financial Planners (CFP) or professional budgeteers recommend spending only 5 – 15% on food expenses. Food includes groceries, dining out, and even the $0.50 at the snack bar.[1] 5% is on the fiscally-conservative side, while 15% is at the top range of sound financial planning. People typically spend more than 15% on food based off my own experience with helping people with their personal finances. Unfortunately, 15% seems to be closer to the average instead of the upper bound.[2] Food costs, specifically dining out expenses, are a prime target for cutting spending.

Financial Genome Project Food Expenses

While doing a 30-day spend challenge or while reviewing your expenses, it’s important to separate out your food expenses as much as possible. For example, you should separate groceries, dining out, and random snacks. This helps you really focus on the areas you could possibly cut to save more money. Here are some tips to reduce food costs:

  • Snacks – This is probably the quickest kill to save money on food expenses. Impulse spending on random snacks can add up quickly. David Back, the author of The Automatic Millionaire, famously coined the phrase, The Latte Factor ™. His website allows you to see the cost of an expense at a specific interest rate. For example, a $5 weekly Latte at a 3% interest rate would cost you $20K in 40 years. This may not seem like a lot, but many people buy more than $5 worth of random snacks DAILY. $5 a day at a 3% interest rate is $142K in 40 years. Spend time playing with the calculator based off your current spending here:
  • Dining Out – This is another place where most people can find easy ways to cut food expenses. For the first time, from 2015 to 2016, Americans spent more at restaurants and take out ($54B) than groceries ($52B).[3] This is concerning because there is up to a 300% markup on food you eat at a restaurant. An increase in dining out makes sense as we become busier and have less time to cook our own meals. In my own household, I started preparing food on the weekends to save time and prevent me from getting fast food. It seems counterintuitive, but income levels don’t impact whether we dine out. The poorest, or bottom quintile, dine out approximately the same amount as all other quintiles. The bottom quintile spends about 16.6% at restaurants compared to the 17.8% for the top quintile—and all other quintiles are in between.[4]
  • Groceries – For my household, choosing to eat healthier actually made groceries more expensive. A frozen burrito cost me $0.33, a small frozen pizza cost me approximately $1, and a packaged meal only cost me $3. The prices haven’t really changed. Once I switched to a serving of chicken and vegetables, the price-per-meal increased to $5 a meal—still less than a fast-food meal. If cutting out grocery expenses is necessary for you, I don’t recommend choosing an unhealthy lifestyle. You can focus on the “unit price” and make sure you’re buying the most affordable product. Also, there are thousands of articles and websites about eating healthy on a budget. Using coupons, taking advantage of sales, and buying bulk are ways to lower the unit prices of your groceries.

The Bureau of Labor Statistics (BLS) does a good job of tracking consumer expenditures. You can read a detailed 2016 report here: In Table A., you can see “Food away from home” costs increased 7.9% from 2014-2015 and another 4.9% from 2015-2016. After doing a 30-day spending challenge, or if you use automated budgeting apps/software, compare your month-to-month expenses and see if you’re food costs are creeping up.

In this chapter we focused on food purely as an expense of your salary. As we get further into the financial genome, we’ll explore where our money on food goes to. Over the past 50 years of company consolidation, 10 companies own nearly all food production in the whole world (pictured below).

The 10 companies where your food expenses go.