Using A Grocery Price Book
|April 8, 2010||Posted by thefrugalvegan under Finance & Budgets, Groceries|
I want to thank Gary Foreman from The Dollar Stretcher for sending me this awesome post to use for my blog. I will be writing an article for this website in the next few weeks and will let you know when it’s ready! Enjoy!
A Grocery Price Book
by Gary Foreman
What is a price book? And how do I set one up?
A very valuable tool in saving money is a grocery price book. And it’s easy and cheap to use. Unlike some other areas (housing, transportation), you can make changes in your grocery budget without making major life changes.
The average family spends around 7.4% of their money on food eaten at home. (source: U.S. Statistical Abstract) That means that a family with an income of about $40,000 will spend nearly $3,000 on groceries. Using a grocery price book is an excellent way to save substantial money without hurting your lifestyle.
To find out how a price book works, let’s look over the shoulder of a professional purchasing agent. They work for a company that will spend over $10 million every year. And the buyer is measured in large part by how much money they can save the company through lower prices. So how do they do it?
They are aware of when they’ll need more of a given item. It’s important not to run out. If they run out, they are in a situation where getting a good price is not the main goal, and getting some “now” becomes more important than price. Our buyer knows that’s a good way to waste money.
All good buyers keep a “buy history” for each item they purchase, which will tell when, where, how many and at what price the item was purchased. This gives the purchasing agent a wonderful tool to save money and make good decisions. It may even include information from times that the price was checked but the item wasn’t bought.
At a glance, the buyer can tell how many to buy at a time. He knows if the price has been going up or down and whether or not it’s time to check the price at a different supplier. Is there a good time of the year or month to buy the item? Do you save money with larger quantities?
Armed with all of that information, the purchasing agent starts shopping, quickly able to spot a good deal. Sometimes the price will cause them to “stock up.” Because they know what they have been using and what they expect to use, it’s easy to decide how much they want to buy. Conversely, they can tell when it’s best to only buy the minimum amount.
Also, they can benefit from seasonal savings even if they won’t need an item now. If an item is cheapest in September and they always buy in November, it’s a good idea to buy early.
What does this have to do with a grocery price book? Everything! The price book is just a homemade version of the purchasing agent’s buy history. And your menu plan is like their forecast.
In its simplest form, a price book is usually a spiral or loose-leaf notebook. It can be any size that’s convenient for you. The idea is to have something that you can take with you and use when you’re grocery shopping.
Divide it into parts that are roughly equal to the sections of the store. For instance, include meats, dairy, beverages, cereals, etc. Make the categories suit your preferences.
Items that you use on a regular basis should have their own pages. On each page, you’ll have a record similar to the buyer’s history. You’ll list the date, store, size and unit price. If there’s something interesting about a price, enter it even if you don’t buy the item.
You’ll soon have a good idea of what each item should cost, spotting trends in pricing. If you shop at more than one store, you’ll see that some items are cheaper in one store while others are best bought at a different market. And your information will get better with age. The longer you keep a price book, the easier it will be to spot trends and bargains.
You’ll quickly be able to tell the real sales and be able to decide if you should “stock up.” Having a menu plan will also help you “forecast” your usage of an item.
Many shoppers keep a cheap calculator with their book. It allows them to compare prices on a per unit basis.
So what’s the payback? Well, some claim savings of 30% after they’ve been using the system for awhile. That seems a bit much, so let’s just say you save half of that or 15% on your bill. That would cut that 7.4% grocery expense by about 1%. Or if you were that typical family at the beginning of the story you’d save about $400 year. That’s not too bad for an investment in a $3 notebook!
Gary Foreman is the founder of The Dollar Stretcher
Click Here for more information on how a grocery price book could save you money.