Post-Pandemic Budgeting Strategies: Food Costs

Key Takeaways
  • Food costs rose by 5.6% in 2020 and continue to increase in 2021.
  • Rising food costs require an adjustment to spending or a change in how you buy food to stay on budget.
  • Food assistance returns to pre-pandemic levels in September 2021.

Between June 2019 and June 2020, the cost of groceries increased by 5.6%, the biggest increase since February 1974. Beef prices rose 25.1%, poultry increased by 8.7%, and eggs saw a jump of 12.1%. Experts blame four key areas:

  • The immediate shift to in-home meal preparation in March 2020.
  • Higher production and processing costs due to increased sanitation requirements.
  • It increased operating and transportation costs for grocery stores.
  • Reduced demand for food services (eating out).

The nationwide stay-at-home ordersin 2020 forced families to cook more meals at home, translating to buying more groceries. The result was food shortages and a sharp increase in food prices that are not expected to decline any time soon.

Restaurants adjusted menus to accommodate the only option available to stay afloat – delivered meals. When the door finally opened, they continued to face capacity restrictions preventing many businesses from being profitable if they relied solely on eat-in diners. In response, restaurants increased menu prices by 3.9%, the highest increase since 2008, during the height of the Great Recession.

The highest increase was in limited-service restaurants, without wait staff,and fast-food, which raised prices an average of 6.2%. Higher demand for fast food and higher wages paid to employees account for most of the price increases. Consumers with lower expenses in categories like transportation and more cash on hand due to stimulus funds and expanded unemployment were willing to pay more for take-out meals.

On the other hand, full-service restaurants had lower expenses because wait staff receive most of their wages through tips. As a result, full-service restaurants increased prices the least of any category.

The other factor impacting restaurant prices is food delivery charges. Restaurants now charge a premium for food ordered through third-party apps. For example, Chipotle increases prices by 13% for food ordered through a delivery app, and Noodles and Co raised prices by 15%.

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Aid Offered During the Pandemic

According to the USDA (US Department of Agriculture), children not receiving food at school, lost jobs, and rising food prices increased food insecurity. An estimated 30 million adults and 12 million children struggle to get enough food to eat. To help, the government increased SNAP benefits by 15%, and school districts relying on remote learning offered weekly lunch pick up or delivery to families with school-aged children.

When Does Aid End?

The increase in benefits currently ends in September 2021. State programs have varying end dates.

Budgeting Strategies for Food Costs

Food is a significant portion of your budget but also a place where you can save money. For instance, eating at home is more cost-effective than eating out. Preparing food from raw ingredients less expensive than buying prepackaged meals.

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The USDA estimates that a couple will spend between $387.90 and $769.20, and a family of four will average $566.30 to $1,103.80 per month. You can use the following tips to keep your budget on the lower end of these estimates.

  • Plan your menu based on weekly sales.
  • Verify what’s in your pantry and use that as a guide for menu ideas.
  • Use meal prep to save time in the kitchen and reduce the temptation for last-minute take-out.
  • Purchase a few easy-to-fix meals you can cook when you run short on time.
  • Use coupons, sales, and buy in bulk to lower the per-unit cost of items you use regularly.
  • Shop with a list
  • Avoid the supermarket when you are hungry.
  • Use leftovers for lunches.

You can also save money on restaurant meals by employing the following tips:

  • Restaurants often serve large portions that allow you to share it or take half home for lunch the following day.
  • Use coupons and order the daily special.
  • Avoid buying alcohol. Drinking water will save even more.
  • Go out for lunch instead of dinner.
  • Order the meal to go and use curb-side delivery rather than a third-party app.
  • Eat out on Monday or Tuesday when many restaurants have specials.
  • Take advantage of kids eat free days.
  • Go early and order from the happy hour menu, which often features half-price appetizers or entrees.

Regardless of which tips you employ, have a monthly budget for food. Separate it into eating out and groceries. Then stick to the budget using the strategies above to get more for your dollar even as you face higher food prices.

  • Have food prices gone up?

    Food costs increased by 5.6% in 2020, the highest increase since 1974. The pandemic played a significant role in rising prices, growing operation costs, and the demand for groceries.

  • Why are food prices rising so fast?

    A 5.6% increase, when food tends to increase less than 2% a year, is felt by low to middle-income families. The pandemic changed how people shop and cook, increasing demand while raising the cost of running a business.

  • How can I lower my food costs?

    Practical strategies to lower food costs include settinga budget for groceries and eating out, and planning your weekly menu based on weekly sales and pantry items.