Tuesday, May 06, 2008

Dealing with sticker shock at the grocery store.

Consumers struggle with rising food costs
By Jennifer Waters, MarketWatch
Last update: 5:25 p.m. EDT May 6, 2008
CHICAGO (MarketWatch) -- Pam Laatz's sticker shock at the grocery store has led her to trim costs on nearly every item in her family's budget.

She and her husband have turned off their home phone in favor of their cell phones. She's switched from a premium cable TV package to a basic one. She's lowered the thermometer in her home and burns logs in the fireplace for extra heat. And she's told her two children that there won't be any vacations like last summer.

Like many consumers, Laatz is reeling from soaring prices for milk, cheese, bread, cereal and other staples on her grocery list...

...Indeed, the cost of groceries is weighing heavily on most people's minds. More than 47% of people surveyed by BIGResearch recently said that the price of groceries was influencing their budgets "very much."

... Food prices escalated by 4.2% last year to mark the biggest annual increase since 1990. Glauber said prices are on track to rise another 4% to 5% this year, though the food categories contributing to the inflation will shift.

Last year, for example, the price of eggs at grocery stores soared 29%, while other retail dairy products were up 7%. The price of poultry rose more than 5%. In some cities, consumers are paying as much for a gallon of milk as they are for a gallon of gasoline.

This year, prices will keep rising, but at considerably smaller rates, if that can be considered a silver lining. But prices on fats and oil, for example, will jump 8% to 9% on top of last year's 2.9% gain. Cereals and bakery products are projected to leap 7.5% to 8.5% following last year's 4.4% growth...

If you don't have a budget yet, I urge you to make one and be ready to adjust spending in other areas to accommodate the rising grocery prices that have no end in sight. The time to get control of the situation is before it becomes a problem - an ounce of prevention is worth a pound of cure.

You don't need fancy software - a simple spreadsheet will do it. I have a spreadsheet for our total monthly budget and another spreadsheet with the grocery items we usually buy and their prices at the stores where I usually shop. You can do this, too - and should do it, soon. I will be happy to email anyone either my grocery spreadsheet or our monthly budget spreadsheet (figures removed on the latter, of course) for you to use as a template. Don't procrastinate. By doing a little preliminary work now, you can have the data you will need already in place later when some hard decisions may have to be made as to what expenses can stay and which have to go.

Because the price of food isn't going down, it's going up. And I don't know about you, but that's a bad thing for us.

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