What’s the True Cost of Eating Out?

One of the best (and most depressing) numbers to look at when buying a car is the “true cost to own”, which factors in deprecation on a loan, interest, insurance, taxes, etc etc to give you a true idea of how much owning your car is actually costing you. Edmunds has a great TCO calculator if you’re interested in trying it out. For instance, a very modest 2011 Honda Civic LX 2dr Coupe with a MSRP of $17,555 will cost you roughly $32,440 to own over the next 5 years (with standard assumptions of a 5 year loan and 15k miles/year). Real quickly you come to realize just how bad owning a car is on your wallet.

This got me thinking: could the same same logic be applied to eating out? Eating out is almost unarguably more expensive financially (which can be easily calculated). Eating out also has a negative impact on your long term health (less easily calculated). In the book Fast Food Nation: The Dark Side of the All-American Meal by Eric Schlosser, he introduces the idea that the true costs of eating fast food are much higher than they appear when you factor in the environmental byproducts of mass-production of meat and corn, the economic byproduct of low wages and poor working conditions of those producing the food, and of course the long term negative health benefits and resulting financial strain placed upon you, your health insurance, and the health care system in general.

My Math

Health costs aside, let’s look at the more definable financial costs of eating out with some back-of-the-envelope math.

Using myself as an example: I tend to eat out about 6 times per month, usually socially, and the rest of the time I prepare my meals myself. I went back and looked at what I’ve spent recently on food. I spend about $20 each time I eat out, so $120/month. My groceries amount to about $300/month. So that’s $420/month. I don’t miss out on social outings with friends at all – sometimes I’ll eat out 2-3 times in a week, but many other times I won’t eat out at all. At the grocery store, I “shop the perimeters”, spending almost all of my money on core ingredients like fruits, vegetables, meat, and dairy and almost nothing on snack foods or drinks. I also tend to buy the highest quality food I can, in terms of taste, origin (local farms get my support more often than not), and preparation (organically raised meat gets my preference as well). Finally, I use almost everything I buy, very little food gets wasted or thrown away.

Now let’s take some educated guesses on someone who eats out more frequently. I know a lot of people who fall into this category. They tend to eat out about twice per day. My guess is that it averages out to be about $10 per meal, breakfast and lunch obviously being quite a bit cheaper than dinner, and the type of place making a big difference too. But that seems fair right? Factor another $10/day in drinks – Starbucks, sodas, and the like. Again, some people are higher and some are lower, but that seems like a pretty fair number. Then let’s estimate another $100/month on groceries because everyone buys some groceries for snacks and drinks at home. I’m not going to factor in alcohol, but I know many people who spend another $100-$200/month easy on drinks. I myself don’t drink much, so we’ll stick to comparing apples to apples.

Add all of that up and it’s $1,000/month in a 30 day month. Crazy right? Compared to my $420. The crazier thing to me is, that I know people who spend way more than that. Not only with drinking, but at Starbucks and nice dinners several nights a week. I also know people who eat three or more meals per day out. They’ll grab Dunkin’ Donuts on the way to work, go out to lunch with co-workers, and then pick up dinner or go out to dinner, and they’ll do that every day.

Yearly it’s a savings of $6,960 ($12,000 to $5,040) simply by eating out less. You can move the numbers around quite a bit and it’ll still come out to be a huge difference. And I eat GOOD. If I see a nice cut of filet mignon, I buy a few steaks without hesitation. I don’t mind spending a few bucks extra here and there to buy local produce. I like the preparation too – I view it as a life-long hobby that I constantly want to get better at. It’s something that my girlfriend and I do together almost every night that helps us get our minds off of our days and enjoy accomplishing something fun as a team. And the reward is so high: great food and huge financial savings.

I also don’t necessarily agree with the premise that eating out saves time. How long does it take to hop in the car, drive to McDonalds, wait in line (or the drive through), and drive home? For most people, probably 15-30 minutes. Most of the time my meals take less than 20 minutes to prepare. If they take longer, there’s usually down time where I can do other things. Plus I’m not putting the miles on my car or using gas, and I’m honing a useful skill rather than waiting in line. In some situations can it be more convenient to eat out? Sure, but in general I don’t think so.

Other Examples

Now it’s not all that easy to find real “data” to support this, although I don’t necessarily think it’s needed. They tackled this topic on the popular Get Rich Slowly blog a few years back. One experiment:

Last year I calculated that I was spending about $80 on food a week, mostly eating out as cheaply as possible. I decided one week to go the fancy organic grocery store in my neighborhood and buy $80 of food to last me a week. What I discovered was that I could fill my cart with more food than I’d ever eat in a week and still have $20-$30 to spare! I bought the richest foods, the most exciting ingredients, and kitchen staples such as oils and spices and fancy olives, and still had some dollars left.

And another:

As an experiment, Rob Cockerham spent all of February 2004 “eating in”, consuming only food from grocery stores. He calculated that he spent $11.55 per day on food and drink. (If you subtract alcohol, he spent $8.65 per day.) He spent 48 minutes per day preparing food. During March 2004, Cockerham ate all of his meals in restaurants. He spent an average of $20.08 per day. (He also left just over $1 per day in tips.) But it didn’t just cost more money to eat out: “The big surprise, for me, was how long it took to eat out. It was easy, when I was eating in, to whip up many meals in less than 8 minutes, but it was almost impossible to get my food that fast when eating out.”

Based on the math from Rob’s experiment, over the course of a year he would spend $7,329 eating out and only $4,216 eating in (using the $11.55/day number), for a difference of $3,113. He also supports my theory that eating out does not really save time.

From a pure financial standpoint, it seems as if it’s a no brainer to prepare all of your own food. As billionaire Mark Cuban says, saving money on the normal, recurring expenses in life is one of the best ways to have more money (duh):

I try to create as much transactional value as possible from that cash. I look at my annual budgets for everything and anything, and I look to see where I can save the most money on those items. Saving 30% to 50% buying in bulk–replenishable items from toothpaste to soup, or whatever I use a lot of–is the best guaranteed return on investment you can get anywhere.

Direct & Indirect Health Costs

And of course, there is the health factor. Let’s revisit that. There are three things I believe to be true:

  1. People are eating out more than they used to
  2. The food we eat out is generally bad for us
  3. More bad food has caused an obesity epidemic that shortens lives, decreases quality of life, and costs everyone a ton of money

From CBS BNET:

About a third of our calories are now eaten outside the home–nearly double the percentage in 1978. And when people dine out, they typically swallow more calories than when they eat at home. Women who eat out more than five times a week consume nearly 300 more calories per day than women who eat out less often. Children consume almost double the 440 calories they usually eat in a home-cooked meal.

Law makers are starting to get involved. Beginning earlier this year all chain restaurants in my home town of Albany were required to list calorie counts on their menus. As you can see from the picture of The Cheesecake Factory menu in the article, things are often much worse than they seem (2,130 calories for Chicken Bellagio, yikes!). As Men’s Health exposed with their Worst Foods in America article and later book “Eat This, Not That”, sit down restaurants are often worse than fast food joints:

A hidden force behind America’s obesity epidemic is the fact that many chain restaurants—which provide one-third of all restaurant meals, according to the New York Department of Health—obfuscate the fat and calorie counts of their menu items, and fight any attempt to shed light on what, exactly, is going on between their buns and inside their taco shells.

Of course, the quality of food that you get when you eat out is almost always worse too. From a Time article Getting Real About the High Price of Cheap Food:

But cheap food is not free food, and corn comes with hidden costs. The crop is heavily fertilized — both with chemicals like nitrogen and with subsidies from Washington. Over the past decade, the Federal Government has poured more than $50 billion into the corn industry, keeping prices for the crop — at least until corn ethanol skewed the market — artificially low. That’s why McDonald’s can sell you a Big Mac, fries and a Coke for around $5 — a bargain, given that the meal contains nearly 1,200 calories, more than half the daily recommended requirement for adults. “Taxpayer subsidies basically underwrite cheap grain, and that’s what the factory-farming system for meat is entirely dependent on,” says Gurian-Sherman.

A food system — from seed to 7‑Eleven — that generates cheap, filling food at the literal expense of healthier produce is also a principal cause of America’s obesity epidemic. At a time when the nation is close to a civil war over health-care reform, obesity adds $147 billion a year to our doctor bills.

That’s a lot of money. It’s gotten so bad that the Center for Disease Control and Prevention has their own Obesity and Overweight section of their website with the heading “American society has become ‘obesogenic,’ characterized by environments that promote increased food intake, nonhealthful foods, and physical inactivity.” The economic consequences are extraordinary:

Medical costs associated with overweight and obesity may involve direct and indirect costs. Direct medical costs may include preventive, diagnostic, and treatment services related to obesity. Indirect costs relate to morbidity and mortality costs. Morbidity costs are defined as the value of income lost from decreased productivity, restricted activity, absenteeism, and bed days. Mortality costs are the value of future income lost by premature death.

According to a study of national costs attributed to both overweight (BMI 25–29.9) and obesity (BMI greater than 30), medical expenses accounted for 9.1 percent of total U.S. medical expenditures in 1998 and may have reached as high as $78.5 billion ($92.6 billion in 2002 dollars). Approximately half of these costs were paid by Medicaid and Medicare.

So even if you and I are perfectly healthy, we’re paying the taxes to help cover these medical costs for others.

Tying it Together

Back to the original premise of the post: how would one go about calculating the true cost of eating out? Any formula would have to factor in at a minimum:

  • Your actual food costs, which I think I’ve shown are significantly less when you don’t eat out.
  • Your direct health costs from eating unhealthy, both in terms of dollars out of your pocket and a lower quality-of-life.
  • Your contribution to all of the indirect health costs.
  • The negative environmental and socioeconomic byproducts of producing cheap, bad food.

14 comments on What’s the True Cost of Eating Out?

  1. Anthony says:

    Great post Adam. I’m a big advocate of staying in too. While I always enjoy a nice long analytic post like this, it’s amazing to me that some people even need it to be convinced. Just look at grocery store vs restaurant prices and it’s clear as day. Even grocery store vs fast food, grocery store wins most of the time, *and* as you mentioned is healthier, better for society, etc.

    If there’s one thing I contend, it is the time factor. If you live in a rural area and/or are already home, it may take time to go out of your way to get fast food. But for most people, it’s already on the way home from work; it’s extremely convenient and basically means the difference between spending 20 minutes cooking (not to mention cleanup time) or 2 minutes in a drive through… Regardless, that’s not an excuse. It’s like saying it’s OK not to exercise because it takes too much time.

    BTW – on an unrelated note, looks like you need to update your server’s clock for DST. You apparently wrote this post in the future 😉

    • Adam McFarland says:

      Good point on the time factor – it really depends whether or not it’s on the way, and there certainly is some clean up involved. In my case I’m working from a lot so it would involve an additional trip out.

      Interesting about the post time – the server clock is adjusted correctly, I wonder if it’s a WP thing, I’ve had the post as a draft for a while…weird.

  2. Tim says:

    I agree entirely with eating in, it’s cheaper and healthier. Extremists like to push the envelope, like the $1/day Diet http://onedollardietproject.wordpress.com/ which are interesting experiments in stretching a food budget in a way most cannot fathom. Sadly I think this means next to nothing, as stated above it’s common knowledge that eating in is both healthier and cheaper, the people who eat out (in particular for fast food) several times a week just don’t care.

    I read an interesting quote yesterday that parallels with this concept “Billionaire’s have large book collections, poor people have large TV’s” while a broad generalization as a whole I think it’s probably true! The people who truly would benefit from some of these simple concepts just don’t care enough about themselves or the big picture to make any changes, compound that by laziness and we are racing towards a country that closely resembles the movie Idiocracy.

  3. Adam McFarland says:

    “The people who truly would benefit from some of these simple concepts just don’t care enough about themselves or the big picture to make any changes, compound that by laziness”

    Now that’s a topic for another post! So true though – I’m probably “preaching to the choir” with a post like this

  4. Dale Ting says:

    Interesting post, I had to respond… I’m not in the choir on this one 🙂

    I eat out probably 90% of the time. I use mint.com to track my finances, so I have a pretty good estimate of how much it’s costing me. Right now, I spend $500-$600 a month on eating out. (Interestingly, back when I was dating someone, I averaged about $200-300 a month… I guess relationships do have benefits). I also go to Starbucks a lot (mainly to give me a venue to work… I drink their iced or hot teas for $2 a pop).

    My finances are in great shape. I challenge the whole notion of giving up simple pleasures to save money. If I had a $3 Starbucks drink every day, I’d spend $90. If I were outfit my living room with nice furniture, that might be $5,000, or 4 years worth of Starbucks drinks. If I had overspent on my house, that could be $500 a month more, or 170 Starbucks drinks (6 drinks a day… good luck getting off that caffeine addiction). I may spend $600 a month eating out, but I don’t have a huge mortgage, very basic furniture, and am not into expensive clothes. I hate the idea of penny wise pound foolish. We should be worrying about the big purchases vs the tiny ones like Starbucks drinks.

    I agree with @Anthony. By the time I prep, eat, and clean up, that could be 2-3 hours. If I pick something up on my way home from work, it’s only the 20-30 min or so to eat it. There’s just no economies of scale for cooking for one.

    I don’t doubt that eating out probably isn’t too healthy for me. I’m trying to find win-win solutions, i.e. good food that’s good for you. I also don’t doubt that if I adjusted my lifestyle to be more home cooking friendly, I could save money by home cooking. I wouldn’t mind getting my home to eating out ratio up more, but I don’t feel like my lifestyle deserves the scorn that it seems to get (I don’t tell my parents how much I eat out so as not to get lectured).

    • Adam McFarland says:

      Thanks for the comment Dale, always nice to have an opposing viewpoint 🙂

      I will contend with the cooking time – I’m not sure what you’re making but 2-3 hours seems nuts. I might spend that on a weekend if I’m experimenting, but in general I’m eating in less than 30 minutes and the cleanup is less than 10 (with a dishwasher of course). Boiling some pasta or some veggies, sauteing vegetables or meat, broiling/baking/grilling meat, all don’t take very long at all. If you make enough for left-overs you end up with a simple lunch or dinner for later in the week. Or, just making a simple salad or sandwich doesn’t take but a few minutes. Same thing with some oatmeal or yogurt with some fruit in the morning.

      Financially, I totally agree that your home, furniture, car, etc etc have a much bigger impact on you. Food is probably towards the bottom in terms of overall impact. Honestly, if the costs were equal I’d still be cooking myself for all of the other reasons. I just sort of see it as a bonus that I’m saving money. That said, there are families on tight budgets that eat out regularly that probably could save quite a bit for them by cutting back and eating in more.

  5. Rob says:

    Wow, awesome post. So much to go at here.

    First off, I’m gonna say that I’m in the “eating-in healthily with local produce” crowd. I do go out and I do pig out sometimes. I try to keep it in check though.

    So, with that clear, where to start…

    Firstly, as great as I think articles like this are, the kind of people who read them generally already feel that way. It’s very much preaching to the choir. Look at the wording Dale used – “lecturing”. How can we educate people? Is assuming that we should educate people snobbish of us? Do they want educating? It’s their life, if they’re healthy, happy and financially secure and not hurting anyone else then should we try to intervene?

    Okay, so on to the recurring expense issue. Adding up recurring expenses is a great way to scare yourself shitless. “Hey honey, look, we’ll spend $72k on cable TV during our lifetime, and if we put that in mutual funds instead…blah blah”. If you enjoy what you’re spending that money on (lattes, season tickets, cable tv…) then don’t add it up. It’s not helpful. It’s marginally more helpful than those facts like “Americans spend 40 years on the toilet during their lifetime” or whatever crap. As if you’re going to rush brushing your teeth by 4 seconds and start using velcro shoes so you can feel like you’re optimising your life…. but it’s still not helpful PROVIDING you’re getting utility out of the expense.
    To those who have never added up these kinds of recurring costs it can be an eye-opener. However, I’ve yet to meet in real life a person who has actually managed to become a millionaire by studying the “latte factor”. With all that said, I’m totally for minimizing recurring expenses IF doing so doesn’t result in a quality of life reduction for you. No point cancelling those theatre subscriptions if that’s your favourite thing to do, but it might be worth seeing if you could save some money on your phonebill.

    I have a friend who eats out for EVERY breakfast and EVERY lunch and most dinners too. She’s on a low wage and bitches about her lack of money, but just can’t see that £5 here and £10 there adds up really quickly. She eats like crap and moans about her weight too. That’s really dumb. She should read this post because she’s not happy with how things are. However, she’ll turn off because she’ll feel like it’s preaching, even though it would benefit her.

    So, what next…

    MEAT! You wanna save some real money and be great to the environment, stop eating meat! It’s really expensive, has a massive carbon footprint and goes off a lot quicker than vegetables. Not to mention any cruelty worries you might have. Why do I still eat meat then, knowing this? Because I like it. I pay for good stuff and I enjoy it. I know it’s not the smartest move, but the cost/benefit equation works for me.

    Where do you shop? As much as we can preach about “shopping the perimeters” (still can’t believe how many people don’t realise this and end up with a basket full of boxes..) would we not be better off walking to a local farm shop and buying direct? That minimises food miles, gives the greatest benefit to the local farmers and gives you the freshest ingredients. I try to do this when I can. A consortium of farms has a permanent stall at my alma mater now, I wish it were there 7 years ago. Cheap, good food on campus. How awesome is that? Is this taking it a step too far? Is it not going far enough? Should we all be starting our own vegetable gardens and only eating in-season? Should we live off boring, plain meals that are absolutely the lowest impact they can be while still being nutritionally good and ethically sourced? There has to be a cost/benefit analysis and that will be different for each person.

    I didn’t realise about the corn subsidies. That’s pretty shocking. I think a part of the problem is that many of us have now been conditioned into paying a certain amount for food – perhaps at the expense of quality and labourers pay. It’s going to take a long time and perhaps government intervention to sort this out. We also need to find a way of openly talking about things without coming across as superior or preaching or lecturing etc.

    These might be worth looking at for the health aspects: http://news.bbc.co.uk/1/hi/health/6180991.stm
    http://www.youtube.com/watch?v=jIwrV5e6fMY

    • Anthony says:

      Rob,

      While shopping at local farmer’s markets does give you better quality (fresh, organic, etc), it is a common misconception that it is better for the environment. In fact, economies of scale make big farms more efficient; think about how much fossil fuel it takes, for example, to bring the average 1x1ft field from seed to food. Now imagine how much less it costs per 1×1 ft when you have 1,000x more feet. Now think about how much it costs, per mile, to ship 1 pound of food, vs. how much it costs per mile when you’re shipping 1,000 more pounds at a time; even if the food is traveling much farther, the difference in cost is minimal, because it’s so much cheaper per pound in the first place.

      As far as corn subsidies are concerned – I don’t think getting rid of them would dramatically change prices. Most foods and beverages don’t even *need* corn; they literally use it as an ingredient just because they get pats on the back from the government. Look at the recent trend with soda, for example, to begin using natural sugar again – did costs raise? was corn an essential ingredient? It hardly ever is.

      • Rob says:

        I said nothing about the size of the farm. Just because it’s a local farmers market doesn’t mean it’s hobby farms. I totally agree with economies of scale. However, by shopping at a farmers market you’re giving more money directly to the farmers and to as few middlemen as possible. You can also be sure that the food miles are minimised that way.

        • Adam McFarland says:

          Good stuff Rob. A few comments:

          “It’s their life, if they’re healthy, happy and financially secure and not hurting anyone else then should we try to intervene? ” Me personally? I wouldn’t write this anywhere else other than my personal blog because it’s my personal thoughts/opinions. Though you can make the argument that it becomes something that we have the right to intervene on when someone’s actions are hurting the general public (i.e. my tax dollars going to cover medical costs of someone who doesn’t take care of themselves).

          “I’m totally for minimizing recurring expenses IF doing so doesn’t result in a quality of life reduction for you.” Exactly – I view eating in as a quality of life increase for myself, kind of a win-win.

          • Rob says:

            Totally agree. That’s where the “hurting other people” caveat comes in. It’s not just an issue in healthcare either. Why must I pay an excess baggage allowance on planes when the dude next to me weighs 3x as much and doesn’t pay any more for his seat?

            As for the second point, it all comes down to /perception/ of quality of life when I think about it. Some may perceive eating takeaway/fast food/lots of cake as a good quality of life, may not think/care about negative impacts down the line (health-wise and financial). Like you, I personally feel that I have a higher quality of life RIGHT NOW by eating healthily, the fact that I get future benefits too is just bonus!

  6. Dale says:

    Respond to @Rob:

    I also challenge the environmental impact of shopping local farmers markets. Food-miles is only one aspect of energy consumption. There’s also the energy to plant the food and get it out of the ground. Ever wonder why food is so cheap at the supermarket? Because it takes less resources to get it there, even with the longer miles. I read one time where someone planted a garden and calculated that his head of lettuce costed him $12.

    That said, I do enjoy farmers markets because they provide unique stuff…

    • Rob says:

      Meh, maybe your farm shops work different to ours!

      If I go to a farm shop I know I’m buying from some of the same farms that serve our supermarkets (there’s a local section in the supermarket served by these same farms), however at a farmers shop I’m certainly not buying from farms in France, Spain, America or New Zealand which provide the bulk of our produce here. I completely dispute that it’s more environmentally friendly to ship stuff from Spain than it is from 5 miles away. I do not see the validity of that argument at all. It’s still coming on a truck, but it’s not coming on a ship or plane. There are no distribution centres to worry about so no secondary smaller trucks that actually serve the supermarkets to consider either. The farms round here aren’t epically huge, but they’re certainly more than cabbage patches. They’re fully mechanised/modernised. As for the reason of stuff being cheaper at the supermarket, that is part of it but another part is that the supermarkets dictate price to the farmers, causing lots of farmers to have to resort to subsidies or be forced out of business.

      AAAAAAAAAANYWAY, the main reason I would buy local would be to benefit the local economy and get fresh food rather than worrying about environmental friendliness as my primary concern. If you look at my original comment, low food miles was only a part of my point.

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