Tuesday, April 14, 2009

Does Cooking At Home Actually Save You Money?

Probably one of the first things you think about when you want to cut down costs is cutting down on eating out. But have you ever considered the opportunity cost of making your own food? You always have to keep in mind that if you choose to do something, you are giving up the opportunity to do any other activity. That is an opportunity cost - what you are giving up by choosing to do something. 

For our case, say it takes you an hour to prepare dinner for your family, to pack lunches or go grocery shopping. Now, it's true you're saving money by doing these things rather than eating out. However, how much time are you spending on these things?

When I had a job at a restaurant in high school, I would always spend an hour cooking lunch/dinner so I wouldn't have to spend money eating out on my way to work even though eating out was quicker.  I can't count the amount of times my manager called and asked me to come in an hour early to cover a shift. I would always say no because I wanted to spend the hour cooking so I wouldn't have to spend money to grab food on the way there. In hindsight, I think I know I made a mistake. I made $8 an hour so every time I turned down an hour of work to make myself dinner, I missed out on $8 that I could have earned. I could have eaten out for about $4. Meaning I could have earned an extra $8 by working, spent $4 to eat out and netted a gain of $4. 

Now, by cooking my dinner at home, I was saving $4 by not eating out, which made me feel pretty smart. But now that I look at it, yes it is true that I saved $4 but I also missed out on earning $8, meaning in then end, I was losing money.

What I want you to take out of this story is to make sure that what you are doing to save money is actually worth it. Today everyone is so desperate to save money that it could be actually costing them money. Not every cost cutting idea is actually saving you money, like my idea of cooking instead of eating out. Be aware of the opportunity costs of the saving measures you undertake.

36 comments:

  1. Cooking at home can still be cheaper than eating out though, even considering your scenario (which is not typical). You could have made extra food on your days off and had that waiting in the fridge for you to reheat in the microwave. You could have eaten a little earlier in anticipation that your boss would call you in. You could make a peanut butter and jelly sandwich and eat that on your way into work. Sure, it takes a little bit of planning ahead, but not much. And after all, if you are going to spend an hour in the kitchen cooking, why not make twice as much so you can avoid cooking for the next week or so?

    ReplyDelete
  2. I agree with Stacy. Your scenario a) would apply to very few people and b) indicates a typical teenage lack of foresight. I earn a salary. If I choose to come home from work and cook rather than stay late, grade papers, and grab fast food, it has no effect on the amount of money I earn, yet makes a great difference in my physical and mental health.

    ReplyDelete
  3. You're not factoring in the health care costs you will incur over time by eating cheap fast food.

    Michael Pollan said that a few decades ago, we used to spend 30% of our income on food. Now we spend only 15% of our income on food but we spend 15% MORE on health care.

    You can make simple, easy, highly nutritious meals at home. Make one quiche or lasagna or a pot of homemade stew on a Sunday and it will feed you through the week. Use a crock pot and making nutritious meals is a snap.

    You're not going to find anything nutritious at most fast food restaurants -- and worse, they're full of petrochemicals, food additives, MSG, GMOs and other toxic ingredients which do harm your health.

    ReplyDelete
  4. What? Sorry...I don't get it. Cooking at home is so much cheaper for us.

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  5. No way. Cooking at home when salary saves a bundle.

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