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5 Steps to Save Money on Groceries

Groceries are your third biggest expense. If you're looking to save some money, start here.
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If you need to save money, start with food.

The top three expenses for an average American household are, in order: housing, transportation and food. If you live in rural area transportation may cost more than housing, but these are the three biggies.

Of these three categories, only one is negotiable. Especially for people who live in the cities, there's rarely much room to negotiate on housing. As rents soar, people increasingly choose their apartments based not on what they want but on what they can afford. The odds are that, if you ever worry about money, the only way to cut your rent would be by taking a major lifestyle hit. The same goes for transportation. This category doesn't cover vacation spending like airfare, this is the money you spend on your car, insurance and public transportation. And that's almost always a must-have for getting to work.

That leaves the food budget. It is the low hanging fruit, the area where you spend the most on luxuries and where you can make some minor adjustments without having to radically change the way you live. If you're a middle-class American you likely spend anywhere from 10% to 20% of your income on food every year.

That amounts to spend between $5,000 to $8,000, with the average food costs settling in at $7,729 per household. Of that, Americans spend an average of $4,363 per household on groceries.

How to Save Money on Groceries

So let's take a look at where you can start trimming some of that fat, so to speak. If you want to save money on food, here are a few places you can start.

1. Manage Your Work Schedule

This is the obvious advice, but we do need to get it out of the way.

Americans spend an estimated $3,365 eating out four or five meals a week.

If that seems high to you it's probably because you're thinking to yourself, "who the heck is going out for dinner almost every night?" It's easy to forget that there are 21 meals in the week. While many Americans might restrain themselves from going out for dinner on the weekends and rightly applaud their fiscal sense, those same people will often cut themselves some slack when it comes to picking up a sandwich from the office cafeteria for lunch.

Yes, it's lunch that adds to the bill. And depending on where you live, that can get particularly expensive. For a rural worker, taking some time off to get an $8 burger and fries can add up. For someone who lives in a city, where a restaurant meal can cost upward of $40, this can quickly crush your budget.

So the best place to start saving money is at the office. We grab lunch out at work to save time, or because our friends are going or to relax a bit in the middle of the day. Start by addressing that. Build time into your schedule to not only have a brown bag lunch but to enjoy it. Take yourself to a park or someplace out of the building, or schedule with friends to all eat lunch together. Pack your lunch the night before so time is less of a factor.

Build time, relaxation and recreation into brown-bagging it. It will save you hundreds, if not thousands, of dollars per year.

2. Drink Less Alcohol

Sorry, but it might be time to cut back on the drinking.

The average American household spends $558 per year buying alcohol from the grocery store. If you're in the middle or upper-middle class, that number is closer to $700 or even $1,000. And this is just on the booze that you take home; it doesn't address going to the bar. This is all money that you can save.

Any cost-cutting routine should begin with the luxuries. We're not here to tell you it's time to buy fewer fresh fruits and vegetables. Those will probably save you money in the long run considering how much less you'll spend on health care by eating healthy.

Alcohol, however, holds down the far end of the spectrum. No one has ever, in the history of the world, been better off because they drank more booze. That isn't to launch a full-throated endorsement of teetotaling. Rather, it's to say that if you want to cut down on that $4,363 per year that you spend on groceries, there's probably a big, fat line item that could disappear without affecting your diet or health in any way. (Except, perhaps, to improve both.)

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Beer, wine and liquor are pure luxuries and that makes them completely expendable. More importantly, there's a very good chance you don't even realize how much you spend on grabbing an occasional bottle of wine or six-pack to have with dinner. If you want to dial back on the spending, that's the first place to start.

3. Budget for Sugar, Sweets and Fat

On average, Americans spend $655 per year on sugar, sweets, fats and baked goods. We spend another $423 each year on non-alcoholic beverages. While a good portion of that will include bread and orange juice, most of it will not.

This is another area where life's little luxuries creep up on you. An occasional coffee cake, a container of ice cream and a six-pack of Coke KO help make a trip to the grocery store a little more fun. They're something to look forward to at the end of the day.

They can also easily eat up your budget. Together, sugar, baked goods and drinks make up almost a fourth of all spending on groceries each year, and they are rarely necessary.

This isn't a screed against enjoying the pleasures of life. By all means, grab a pint of chocolate chip cookie dough ice cream to enjoy after a long day at work. However, this is also a chance to cut down on spending that you certainly don't need. The best way to approach this is by creating a treats budget. Give yourself $20 or $30 per month to spend on the completely frivolous items at the grocery store. Have at it and have fun, but keep track of that spending and stop when you've hit your budget.

Because the odds are that you're spending a lot more on those small pleasures than you realize, and if you'd like to save some money it's a great place to start.

4. Make a Menu, Make a List

Let's pivot from accounting to psychology.

One of the surest ways to splurge on groceries that you don't need is to spend more time in the grocery store. Every time you go shopping you give yourself another chance to impulse buy a bag of chips or a six-pack of beer.

So cut down on those opportunities.

To minimize your time in the aisle make a menu of your meals for the next several days and plan your shopping accordingly. Especially for people who live near a grocery store, it's very easy to make "picking up something for dinner" part of the daily routine. This has the appeal of spontaneity, but it also means that almost every single day you wander your local Food And Stuff trying to figure out what looks good.

Do you know what looks good at 6 p.m. on a Wednesday? Everything.

Instead, plan and shop for at least three days. Make a specific list for what you'll need to make those meals, then go shopping for only those items. You might grab some stuff off the shelves here and there, but you'll cut way down on the splurges by reducing trips to the store and going with a mission instead of looking for inspiration.

5. Don't Shop the Sales

Finally, a piece of counterintuitive advice. When it comes to groceries, don't shop the sales.

This isn't to say that you should ignore sale items. If tuna is down to $1 a can, and you like having tuna sandwiches for lunch, by all means, load up. If you're making your menu for the week and you see an advertisement with great deals, use that. Incorporate that into your planning. All of that is great advice.

What you should not do is grab items off the shelf because they've been marked down. You shouldn't change your plan based on what's cheap. This is a bad idea for two reasons.

First, you have a plan, so stick with it. Shopping the sales at a grocery store will encourage you to ditch your carefully created menu. It will keep you from building up good habits and reinforce bad habits of wandering the aisles until something looks cheap or good. On any given shopping trip you may save a few dollars by building dinner around that tortilla markdown, but this is likely to encourage behavior that will only hurt you in the long run.

Second, grocery stores tend to mark down items that are about to expire. While this may not be a problem for something you intend to use the same night, again, it will hurt your ability to plan for the long run. Something with 36 more hours on the shelf is no good to you in three days. By shopping for marked down items there's a very good chance that you will only wind up spending more money on food that you had to throw away.

Save money when it fits your plan. If you can build your meals around a great deal on chicken, by all means, do so.

Just make sure to shop around your budget, not the other way around.