Friday, September 27, 2013

Breaking all the rules

Today I got the bill for my primary credit card—the one I use for everyday purchases like groceries and gas—and, as I always do, I went through it line by line, checking each purchase listed against the receipts that I'd stashed in an envelope to make sure everything matched up. I didn't find any suspicious charges, but I did find something else that interested me: of the twenty-seven individual charges included on this month's bill, eighteen were for groceries. And that wasn't even all the grocery shopping we'd done in the past month: I also found receipts in the envelope for groceries bought with cash at Aldi and at Terhune Orchards, and my expense log for the past month shows two additional cash purchases at our local farmers' market. So we have made at least 22 separate grocery purchases—counting as "groceries" any food not meant to be eaten right on the spot—in the last month. And 15 of those were purchases of $10 or less, representing trips on which which we popped into the store for just a handful of items.

Now, this is exactly the opposite of what most budgeting "experts" advise you to do. This article on grocery savings, for instance, recommends that you plan a week's worth of dinners ahead of time and then make just one trip to the grocery store (thus avoiding impulse buys and taking better advantage of sales) and, at least once every three months, spend an entire week eating from your pantry and avoid visiting the store at all. Both Trent Hamm of The Simple Dollar and Emily Guy Birkin of Live Like a Mensch say they plan their grocery shopping this way. Annette and Steve Economides, who describe themselves as "America's cheapest family," advocate shopping no more than once a month, arguing that quick trips invariably result in impulse purchases—in most cases, they claim, more than doubling the total purchase.

Moreover, the fact that we even use a credit card to pay for groceries is a big no-no according to some budget mavens.  This Investopedia article, for instance, claims that despite the consumer protections offered by credit and debit cards, it's "almost always" best to pay in cash, because paying in plastic makes it too easy to overspend. Michelle Singletary of The Washington Post makes the same argument about "the perils of plastic" in promoting her 21-Day Financial Fast, which I discussed on this blog last year. (As I noted at the time, financial writers and bloggers always seem more eager to pounce on the studies that show credit promotes overspending than on the ones that show the reverse.)

So in theory, at least, we're doing it exactly wrong by making frequent, small trips to the grocery store and using our credit card even for small purchases. But for us, there are several reasons why it makes sense to shop this way. First and foremost, we buy items wherever they're cheapest. If we did all our grocery shopping for the month, or even the week, in a single trip, then we'd have to buy everything we needed from just one store. Our system, by contrast, involves visiting many different stores to take advantage of the best deals at each. Just in the past month, we've visited more than half a dozen stores and picked up different bargains at each one:
  • At Trader Joe's, 2-ply recycled bath tissue for $4.50 per dozen, organic raisins for $2.99 a pound, organic sugar for $1.75 a pound, organic chicken drumsticks for $1.99 a pound, and a toothpaste that's both cruelty-free (for me) and SLS-free (for Brian) for $2.29 a tube—something we can't buy anywhere else at any price.
  • At Aldi, raisin bran for $1.51 a pound, chocolate chips for $1.79 a bag, grated parmesan for $4.78 a pound, and strawberry jam for $1.77 a pint.
  • At the Whole Earth Center, organic white mushrooms for $2.29 a pound, organic bananas for 79 cents a pound, and a Fair Trade chocolate bar for just $1.89 on sale.
  • At Shop-Rite, sale-priced orange juice (the good stuff, not from concentrate) for $1.35 a quart and mozzarella cheese (also the good stuff, sold in blocks that you grate yourself) for $1.99 a pound.
  • At Pathmark, locally grown apples for 98 cents a pound.
  • At H-Mart, free-range eggs for $2.50 a dozen and scallions for 33 cents a bunch.
  • And at our own local Stop & Shop, seltzer at 50 cents a liter and whipped cream at $3 a can.
This isn't everything we bought, of course, just the items that were particularly good deals—but everything on this list was cheaper at the place we bought it than it would have been anywhere else. If we'd tried to buy all these items, along with everything else on our list, at just one store, we would undoubtedly have spent more overall.

You might think that making all these individual trips must cost us something extra in gas. This would be true if we made each trip separately, but we don't. When we check the week's sale fliers, for instance, we don't make a special trip to any particular store unless it has several items we need—or the trip can be combined with a visit to a different store that has different items on sale. We visit the Whole Earth Center in Princeton on Thursdays, when we head down there for Morris dance practice; we stop at the Aldi en route to the same destination; when we need to hit the Trader Joe's, we either visit the Princeton store on a Thursday or the Florham Park one as part of a weekend trip to the Morristown area. And of course, the Stop & Shop being right here in town, we can go there on foot—so not only does it cost us nothing in gas, it also gives us an incentive to get some exercise.

In fact, there are some cases in which we could, theoretically, save more money the more trips we make. That's because some of the stores where we shop give us a discount for bringing our own bag (as we invariably do). Our local Stop & Shop, the one store we visit most often, has discontinued its 5-cent bag discount, but we can get 2 cents off at Shop-Rite and Pathmark, plus an impressive 10 cents for each reusable container we bring at the Whole Earth Center. Thus, if we happen to need five items from one of these stores, we actually save more money by spreading out the purchases over five separate trips and getting the bag discount each time, rather than making one trip and putting all five items in just one bag. (We don't actually plan our trips this way, because it's just not enough money to worry about, but it's still an effective counter to the argument that more shopping trips invariably add up to more money spent on each trip.)

Lastly, we actually save money by putting groceries on our credit card rather than paying in cash. That's because the card we use most often for groceries is our Chase Freedom card (the one I picked up as part of my financial tuneup in 2010), which gives us 1 cent back for every dollar we spend. Moreover, we get a whole nickel back on purchases in certain categories, which change from quarter to quarter, but at least occasionally include groceries. Thus, if we spent $750 on groceries during a three-month period when groceries were one of these special categories, using our card for every grocery purchase would save us $37.50 over the three months—certainly not a huge sum, but not a negligible one either.

Now, you may be thinking at this point that all this is well and good in theory, but how does it work out in practice? How much, in short, do we actually spend on groceries, compared to others who follow different strategies? It's a fair question, and I'll answer it as directly as I can: our average monthly spending on groceries for the two of us is $232.16. This works out to $3.87 per person per day, which, as I've noted before, is comfortably within the spending limits for SNAP (the program formerly known as Food Stamps) in our state. Our monthly grocery spending is about 87 percent of what the USDA estimates a family of two would spend under its Thrifty Food Plan (the cheapest of four possible food plans that all meet the standards for a nutritious diet). Moreover, our actual grocery spending is probably a bit lower than $232 per month, because this number includes various nonfood items purchased at grocery stores (such as the toothpaste and toilet paper I mentioned above), while the USDA's numbers are specifically meant to reflect spending on food and nothing else.

So as you can see, we don't do too badly following our many-stores shopping plan. But could we do even better by adopting the one-trip-a-week or the one-trip-a-month paradigm? Well, Trent Hamm, in his latest Simple Dollar post, estimates that he spends about $100 a week to feed his family of five. This is well below the USDA's Thrifty Plan estimate of $159 a week (assuming two adults between 19 and 50 years old and three children ranging from 3 to 7 years old). In fact, it's about 63 percent of the Thrifty Plan cutoff, which makes the Hamm family more frugal eaters than we are. However, it's worth noting that they haven't always been this thrifty: seven years ago, when they were following much the same basic shopping strategy they have now, their monthly spending was $770 for a family of four—placing them firmly in the "Moderate-Cost Food Plan" range, the second-highest of the USDA's four spending tiers. So while it clearly is possible to save a lot of money following Trent's shopping strategy, it's also clear that following it isn't guaranteed to save you money.

So basically, I think it comes down to a question of personal preference. Both Trent's family and mine now fall well within the boundaries of the Thrifty Plan, yet we follow very different shopping strategies. So clearly, it's unreasonable to say either that his approach is "right" and mine is "wrong," or vice versa; it all comes down to what works best for you. Moreover, just as the Hamm family has brought its grocery bills down significantly in the past seven years without changing its overall shopping strategy, I have no doubt that a family could spend far less than Brian and I do by following the same basic shopping strategy we have. In fact, I know it's possible, because I more or less learned this strategy from the Tightwad Gazette books by Amy Dacyczyn (all hail the Frugal Zealot!), and her family of eight (!) used to spend just 28 percent of the USDA's Thrifty Plan level. Her number puts both me and Trent to shame, but it also is oddly comforting to me, as it shows just how much room I still have for improvement—and all without any major changes in the way I currently shop.

[EDIT, 6/23/14: I just took another look at the Simple Dollar post in which Trent Hamm discussed his family's food-buying strategy, and I noted that in fact, he does not recommend making just one trip to just one store for the week's groceries. He actually says, "Most of the time, when we go grocery shopping, we make at least two stops, but the exact stores we stop at varies from week to week." So it's possible that his ability to cut his family's monthly grocery bill from $770 for four people to around $430 for five people was partly a result of his decision to shop more stores for the best deals—in other words, adjusting his shopping strategy to be a bit more like mine.]
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