Marin Mommies is presents another great guest article by Marin mom and financial planner Katy Song, CFP®.
One of the wonderful things about living in the Bay Area is the excellent food. But spending at great groceries stores, farmer’s markets and restaurants can add up each month. Food related expenses tend to eat up a big part of a family budget, and one of the most frequent questions I get from couples is “How much should we spend on food?”
My answer to that question depends on the family’s specific situation. Ask yourself the following questions right now:
- Do you know how much you spend on groceries, eating out, and coffee?
- Is buying organic a priority?
- Do you love eating out?
Answers to these questions will drive a big portion of your spending on food. If you cannot answer question #1, look at your spending for a couple of months and add up all the charges for grocery, eating out and coffee. Take the average of those months and decide if that number feels comfortable for your family.
If you want to know how you compare to your neighbor, here are averages to help you gauge whether you are overspending in this area. According to Mint.com, the average monthly spending on all food and dining in San Francisco is $1,325, compared to the California average of $1,282 and US average of $1,169. These averages are not specifically for families, so it probably underestimates how much a family spends on food. However, this clearly shows that it costs more to eat in the Bay Area.
From my years as a financial planner, most families in the Bay Area spend between $800-1,200 each month on groceries. Add to this the cost of eating out, coffee shops and convenience items; you are looking at an additional $250–$1,000 per month depending on your lifestyle. This is a wide range, and where you fall in this range depends on how important food is to you and how much you can afford to spend. The good news is that eating out is discretionary and can be reduced relatively easily by more mindful planning.
For example, a burrito take-out dinner for a family of four will likely run you $35 without beverages. You could make that same dinner at home for about $15. Is the extra $20 worth the convenience? Sometimes the answer is yes. But consider the opportunity cost of that money. If you took the $20 per week and invested it earning 5%, you would have $1,067 at the end of a year.
The USDA kindly provides “Official USDA Food Plans” to help families decide how much money they should be spending on food. They provide four food plans: thrifty, low-cost, moderate and liberal. For a family of four with children under the age of 5, the four plans range from $533 to $1,035 per month on groceries. These plans assume that all meals and snacks are prepared at home. If you adjust these averages for an increase in the cost of living in the Bay Area (about 13%), this brings you to $1,170 per month on food if you are on a liberal food plan.
Inflation is also rearing its head in grocery prices. They have increased about 3.9% year-over-year. So a Bay Area “liberal food plan” will likely increase from $1,170 to $1,217. Hopefully your paycheck will go up as well, but if it doesn’t, proactive planning can lessen the bite to your family budget.
Katy Song, CFP®, recently launched her solo practice Katy Song Financial Planning. She specializes in objective and customized financial plans for families with young children and couples starting their lives together. Katy lives with her husband and two children in Mill Valley. You can reach Katy at katy@katysong.com or www.katysong.com.
As an experienced financial planner with a deep understanding of family budgeting and expenses, I can provide valuable insights into the concepts discussed in the article by Katy Song, CFP®. Katy's article revolves around managing food-related expenses in the Bay Area, a region known for its excellent but costly food options. Let's break down the key concepts discussed in the article:
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Assessing Food Spending: Katy emphasizes the importance of understanding your family's spending habits related to groceries, dining out, and coffee. This self-assessment is crucial in determining a comfortable budget for food expenses.
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Organic and Dining Preferences: Katy highlights the impact of personal preferences, such as choosing organic products or enjoying frequent dining out. These choices significantly influence the overall spending on food and should be considered when setting a budget.
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Comparisons and Averages: Katy provides insights into average monthly spending on food and dining in San Francisco, California, and the United States. This data, sourced from Mint.com, helps readers gauge whether their spending aligns with regional averages.
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Local Variations: The article acknowledges that regional factors, such as the high cost of living in the Bay Area, can affect the average spending on food. Katy's experience as a financial planner suggests that Bay Area families typically spend between $800-1,200 per month on groceries, excluding additional costs for eating out and convenience items.
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Discretionary Spending on Eating Out: Katy emphasizes the discretionary nature of eating out and suggests that with mindful planning, this expense can be reduced. She provides a practical example, comparing the cost of a take-out dinner for a family of four with the potential savings of preparing a similar meal at home.
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USDA Food Plans: Katy introduces the "Official USDA Food Plans" as a benchmark for families to determine appropriate spending on groceries. These plans, categorized as thrifty, low-cost, moderate, and liberal, offer a range of monthly expenses for a family of four. Adjusting for the Bay Area's cost of living, Katy suggests a liberal food plan could cost around $1,170 per month.
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Inflation and Planning: The article acknowledges the impact of inflation on grocery prices, noting a 3.9% year-over-year increase. Katy advises families to proactively plan for potential increases in food expenses and consider the broader financial implications.
In summary, Katy Song, CFP®, provides comprehensive advice on managing food-related expenses, taking into account personal preferences, regional variations, and economic factors. Her expertise in financial planning adds credibility to the practical tips she offers for optimizing family budgets in the Bay Area.
