The Long-Term Cost of Dining Out – Money Versus Time

Visual Capitalist completed a study in 2019 on the spending habits of Americans by income group.  Unsurprisingly, the average American household spent close to 5.3% of their take-home income, or $3,365 per year, on dining at venues outside the home, take-out, and fast food. Out of the $7,728 spent on food, 43.5% of that was spent on dining out.  These figures exclude alcohol purchases.

Diagram explaining how the average American household spends/saves their paychecks.
Source: Visual Capitalist

For those in higher income percentiles (top 20th shown below), the percentage grows to 48.9% of total food spending – more than the average annual cost of health insurance, clothing, and utility services.  That also amounts to 6.4% of total household spending.

Diagram explaining how a typical upper income American household spends/saves their paychecks.
Source: Visual Capitalist

We love our food.  In fact, our society glorifies dining out with words like “foodie” and “food selfie” and dining out is an integral part of our social fabric.  When we were children, it was considered a treat to go out to dinner.  Now, when we are adults, we order breakfast and lunch for convenience and we go out to dinner, also for convenience, but also to celebrate, experience variety in cuisines, and to interact with our friends and family at a fun venue.  For these reasons, while I’m going to advocate dining out less often, there is no need to eliminate it entirely from your routine.

Source: Urban Dictionary

Dining Out Versus Dining at Home/Packing Food – Another Opportunity Cost Exercise

In an previous post on buying versus leasing a car, I discussed the concept of opportunity costs.  In that case, if you leased a car, at the end of your lease you did not have a car.  That was an opportunity cost.

The question about dining out versus cooking at home/packing food is another opportunity cost question.  In this case, we exchange the convenience of dining out to the monetary cost savings of cooking at home.  It is quite literally a question of time, to buy groceries and cook in this case, versus money.

How Much Money You Save By Cooking at Home?

An American in the top 20th percentile for income spends $6,402 per year on dining out.  They eat 4.2 commercially prepared meals a week, on average or 20% of the meals they eat are commercially prepared (I’m hiding my math here as not to confuse people).  To eat those meals at home, it would cost $1,669 (again hiding my math).  The conclusion?

A high-income family can save $4732.75 per year by not dining out

If you have been reading my other posts, you know what happens next.  I take that money I save each year and I invest it at a 7% annual rate of return.

By doing so, your net worth:

  • Increases by $28,400 after five years
  • By $68,662 after ten years
  • By $206,649 after twenty years
  • And by $483,958 after thirty years

It feels like a small difference at first, but that’s what we do at WELLth.  Small lifestyle changes creating small positive effects on your net worth.  Over time, these small changes compound on each other and create a significantly positive impact on your total wealth.

And yes, I understand that cooking at home for every meal is not possible for most.  That’s okay – if anything, maybe this article spurs to you pack your lunch instead of eating fast food once a week.  We’re not finished though.

When Dining Out Makes Sense – The Opportunity Cost of Time

Cooking at home is not free – in fact it takes time to go to the grocery store and to cook for yourself, and time is a valuable resource.  In this case, you can put a value on your own time to see if dining out makes sense for you, since you save time by not needing to cook for yourself.

Let’s say that it takes three hours a week to prepare your own cuisine, pack your own lunches, and grocery shop.  Let’s also assume the cost of your time is the same as your job.  In this example let’s say $40/hour.  In that case the cost of your time to prepare your own food is $120.

Now, subtract $120 from the monetary amount you would save by not eating out.  In this case, the $4,732.75 extra families spend by dining out equates to $91.01/week.  Since the value of this person’s time is higher than the cost of having their food prepared, it may make sense for them to forgo at-home cooking. Of course, one would have to assume in this scenario that the time saved by dining out would be dedicated to working more to earn more.

Conclusion – Cooking at Home Increases Your Wealth

In this article, we did some financial jiu jitsu to determine that cooking your meals at home, versus buying commercially prepared food from restaurants and fast food chains, can save you thousands of dollars over a year, and hundreds of thousands of dollars over a few decades.  Therefore, consider dining out one fewer time a week, or making a commitment to pack your lunch each day you go to work.  These decisions will generate small savings, which will compound into big savings over time for vacations, retirement, and other large purchases.

Leave a Comment

Your email address will not be published. Required fields are marked *

3 × 1 =