Food prices are poised to rise by about 3% this year. But does that really matter to your overall budget?
We as Americans are in a very lucky position with food. What the average family spends on food — about a dime of every dollar — is just about the lowest percentage in the developed world. (In other countries, people spend half of their pay at the grocery store just to put food on the table.)
Consider this: If the cost of groceries goes up 20%, that would mean your overall expenses would go up 2% because of that dime on a dollar stat. Since we’re really looking at 3% increases this year, that means it will translate to an increase of one third of 1% for the food part of your budget.
So the overall effect of rising food prices is almost more psychological than real. I know the price increases hurt when you walk down the aisle and see something that used to be one price and is now a higher price. But remember, for the typical American family, it’s an aggravation more than a disaster.
Why is food so much cheaper here than around the rest of the world? It’s largely because of our fantastic distribution system. Plus, we have a big agricultural industry producing food and a very competitive market for the sale of that food.
People sometimes forget that the biggest factor in your overall cost of living, overwhelmingly, is your automobile. The cost to buy and insure it, the cost of depreciation, any loan you may have on it and fuel. It works out to where the cost of transportation rivals that of housing.
So the cost of food is not quite irrelevant, but it’s way down the list of things to fret over — even in an era of rising prices!