You Should Be Spending This Much Of Your Income On Groceries

While food prices aren't falling, according to the Consumer Expenditure Survey, grocery inflation has begun to cool as we get further away from the pandemic. This is good news for everyone, but especially those who earn less. As the USDA's Economic Research Service reports, though people with higher income spend more on food, it represents a smaller percentage of their income than those who earn less. So, even if a person wishes to spend only a certain percentage of their income on groceries, the price of food will impact whether or not a person is able to do so.

This said, the Department of Agriculture offers guidance on nutritious, practical, cost-effective food plans for different spending thresholds: thrifty, low-cost, moderate-cost, and liberal. According to this outline, a person (aged 20 to 50) can spend around $275 a month on groceries, which, if based on an average median monthly salary of $4,472 (per the U.S. Bureau of Labor Statistics), would be about 6% of a person's income. This said, for people who earn less, such as workers aged 16-24, who earn a median monthly salary of $2,792, $275 represents nearly 10% of their income.

The USDA's Economic Research Service offered an eye-opening statistic for 2022. Per the ERS, households in the bottom fifth of income distribution spent $5,090 on food; this represented 31.2% of their income. In contrast, households from the top quintile of income spent three times as much, an average of $15,713, yet this represented 8% of their income. This said, 8% is right in the middle of the 6% and 10% mentioned in the intro.

If one were to follow the USDA's food plans, it's possible to spend about 10% of one's income on groceries. For a person aged 19/20-50 years old, monthly grocery spending can range from $272.70 for the thrifty plan to $432.05 for the liberal, which would represent between 6.1% and 9.7% of the median U.S. monthly salary (before taxes), respectively. For a family of four, meanwhile (two adults aged 19/20-50, a child aged 6-8, and a child aged 9-11), the USDA says a thrifty food plan would cost $975.30 a month. However, consider, that if the monthly median income remains the same at $4,472 a month for this family, $975.30 would account for 21.8% of their income.

Per the Consumer Price Index for September 2022 to September 2023, consumers spent 2.4% more on groceries year-over-year, which while an increase, is 9.4% less than the 11.8% increase seen from December 2021 to December 2022. The difference in increases in food prices during these same time periods puts these spending numbers in further context. From September 2022 to September 2023, food prices were up 3.7%; between December 2021 to December 2022, they rose 10.4%. So, as said, food prices definitely do appear to be cooling in 2023, while food expenditures look to be bouncing back closer to what they were pre-pandemic.

Also from the Bureau of Labor Statistics, we know people spent $5,703 on groceries in 2022, an 8.4% increase from 2021 and a reflection of the grocery inflation experienced throughout that year. Based on this number, people spent about $475.25 per month on average, which is higher than the liberal food plan from the USDA, and around 11% of the U.S. median monthly income. According to this data, then, it would seem spending 10% or so of your monthly income on groceries is a good number to aim for, if possible for your household.