Saving Money on your Groceries - the Equimarginal Rule
College student or not, food is a significant expense, especially if you like to keep yourself well fed all throughout the day (as a single guy with a whole fridge to myself, I have plenty of supplies…)
My parents, being Chinese, have always instructed me never to save money on food. That doesn’t mean they want to see me buying caviar every week, but they do want me to be well fed and eating foods that I like. Depending on your circumstances, you may or may not need to keep your grocery bills down, but there’s a good reason to trim your grocery costs regardless of your financial situation - a lot of food that you buy probably sits languishing in the back of your fridge, the bottom of the crisper, or in an obscure corner of a cupboard. Eventually, it might go to the food bank if it’s non-perishable, but a lot of it is simply wasted.
Avoiding waste is a perfectly good reason to try to save some money on your groceries - and so is saving money because you’re simply cash-strapped. Let’s examine how you might go about saving money on food without starving or eating clearance-bin potatoes every night of the week.
First, make sure you’re shopping in the right place for your situation. If you’re buying a lot of food from variety/convenience stores, consider getting the same foods from grocery stores instead whenever possible. I once had a roommate who was worrying everyday about his money situation, yet he made frequent trips to the corner variety store for chips, pop and frozen convenience foods, all of which were available at the grocery store for 30% cheaper.
So imagine you’re shopping at your local grocery store, supermarket, or farmer’s market. You’re finished, and about to go checkout. Your bill might be, say $80 if you checked out. Now, try this: make one quick trip around the store, and lop $5 off your bill without making yourself feel shortchanged.
That might involve putting some things back on the shelf that you wouldn’t miss a whole lot, like a six-pack of pop, the gum or magazine you grabbed near the checkout, or the English muffins you know you won’t eat. But sometimes all you need to do is swap a name-brand jar of pickles for a store brand, or exchange the 3-ply box of tissues for a 2-ply box (do you really need 3 plies of tissue?)
The items that you put back tend to be ones that you only marginally want anyways. It may be nice to have them, but you may not even notice they’re missing. Likewise, if you exchange a name brand item or a generic one, you’re probably indifferent to any variations in quality between the items, if there is one at all.
It helps, when you’re buying groceries, to use the Equimarginal Rule, which comes from Economics. All the Equimarginal Rule says is this: Make sure that the benefit you get from the last dollar you spend on each item is equal. WHAT THE DICKENS DOES THAT MEAN!?
Kindly permit me to foray into Economic Theory for a moment. There is no math, and no graphs are involved. Take a deep breath, and let me explain. Economic Theory suggests that the typical, rational person, let’s call him Jim Bob, spends his money this way: he will spend his income such that he is as well off as possible. Obvious, right? What it also implies, however, is that the last dollar he spends on one item brings him the same amount of well-being as the last dollar he spends on any other item. In other words, if Jim Bob spends $100 on chocolate, and $10 on gum, he enjoys the last dollar’s worth of chocolate exactly as much as he enjoys the last dollar’s worth of gum. Why does it have to be this way? Because if Jim Bob enjoyed the last dollar’s worth of gum more than the last dollar’s worth of chocolate, he should buy more gum and less chocolate, until he enjoys equally the last dollar spent on either one. You might now know why economists call it the “Equimarginal” rule. That’s because at the margin, that is, at the very last dollar you spend on a product, the benefit you get from the last dollar spent on any product should be equal.
Jim Bob should be examining every item that he buys using the same criteria. If the last dollar he spent on concerts didn’t make him as happy as the last dollar he spent on beer, he should buy more beer, and attend less concerts, until he is just as happy spending his last dollar of income on either item. At the point where he has spent all of his income, and enjoys equally the last dollar spent on every item he’s bought, he is as well off as possible, and can’t possibly do any better, unless he increases his income, there are changes in the prices of the products he buys, or he pulls off a jewellery store heist. That’s it for Economic Theory - see, that wasn’t so painful, was it?
Now consider the following example: If you spend $8 on a package of 3-ply tissues, but you could get a 2-ply package for just $6, and you’re indifferent between 2 or 3-ply tissues, then the last dollar (in fact, the last 2 dollars) that you spent on 3-ply tissues didn’t bring you much benefit at all. On the other hand, $2 might buy a pound or two of your favourite fruit. In that case, the last dollar spent on fruit brought you lots of benefit.
Using this principle, you can evaluate your purchases from the point of view of how much benefit the last you spend on each grocery item brings you. If you wouldn’t miss a $1 package of gum, or a $3 six-pack of pop, you’re really not getting all that much benefit from them, and it makes sense to expel them from your cart. That magazine on the rack beside the cashier might look interesting while you’re waiting in line, but if you’re going to throw it onto the backseat of your car and forget about it, don’t bother buying it. If the quality difference between name brand and generic label laundry detergent isn’t significant from your point of view, don’t spend the extra money on the name brand, and buy something else that you’d enjoy with the money you save.
Even with foods that you really enjoy, there are limits you should observe. For instance, peaches are my favourite fruit. But that doesn’t mean I want to eat 10 of them in the next week. I might enjoy 3 peaches this week, but when it came time to eat the 4th before it goes rotten, I might feel like I’m forcing myself to eat it. In that case, I shouldn’t buy any more than 3 peaches, because the 4th peach brings no benefit to me (in fact, it makes me worse off).
By making sure that you get the most of the last dollar you spend on any grocery item, you’ll spend less on your groceries, and waste less food. It all comes down to doing a bit of thinking before putting placing things in your cart. Considering the environmental costs of producing and shipping food to every grocery store, and the millions of underfed people on other continents, it only makes sense to buy only what you can reasonably eat and enjoy in a week. At the very least, you’ll save money for clubbing 