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A Food Cooperative Has Some Benefits, but Not Always Financial Benefits

Everyone wants to eat better these days so the idea of local and organic food is quite popular. In some parts of the country your food may travel thousands of miles before it reaches your table, so it only makes sense that if you could get your food a little closer to home it would be fresher, and probably cost less since it didn’t have to travel as far. So, how do you go about getting local food? One option is to join a local food co-op or cooperative that brings local farmers together to sell their meat and produce locally. Since we had a new co-op start up right by us I figured I would give it a try. After a few weeks I’ve learned quite a bit about the process. Some things were as expected, but there were many surprises as well.

How it Works

The concept of a food cooperative is pretty simple. They are typically member-owned volunteer organizations. Members may be required to pay an annual fee to be part of the co-op, and it is often expected that members will try to help volunteer in some say if possible. The co-op itself is made up of two key groups: the producers, and the consumers. The producers are the local farmers who make the food available and the members are the consumers who purchase the goods.

Some co-ops make their food only available to members, whereas others may be open to the public with members receiving a discounted price on the goods. Regardless, the co-op is set up as a group-owned marketplace that brings together local food and local consumers.

Why I Joined

When I heard about the new cooperative opening up by me I was intrigued by the ability to buy local food. We live in a very rural area that’s full of farms as it is so I figured it would be great to support my neighbors. Literally. Plus, we do almost all of our eating at home. Since I cook every day it can make a big difference when you have really fresh ingredients.

In addition, this co-op had a very nice internet feature. I could go online each week and see what was available, place my order from the comfort of my home, and then pick up my order once a week. I love when I can get things done online so this was a nice benefit.

The Pros

It’s probably pretty obvious, but if you value organic food and supporting your local community, a co-op is a great thing. You can be sure to get produce or meat that was produced locally, organically, and get the freshest possible ingredients.

You can also volunteer and get involved so that you can give something back to your community. If you’ve always wanted to help out but didn’t know how, a food cooperative can give you a chance to work directly with your neighbors.

In addition, you will probably make some new friends and meet new people. The first week at my co-op I ordered some beef and when I went to pick up my order I got to meet one the farmer personally. Have you ever been to the grocery store and met the person who personally grew or cared for your food? Exactly. That was really nice and we struck up an interesting conversation. The best part is I learned his farm is literally less than 2 miles from my house. He even gave me his number and said I could call in personally and request food at any time and pick it up from him directly. How cool is that?

The Cons

Of course, there are two sides to every coin. With the many benefits outlined above there are also some downsides. In my case, virtually all of the downsides are financial. If you sign up for a food co-op and expect to save money, you might want to think again.

The first financial issue that stuck out was the membership fee. I had to pay $35 just to become a member. Of course I realize it’s going to a good cause so it didn’t bother me too much, but still, shelling out almost a week’s worth of groceries toward a membership fee just for the privilege of buying this food was a bit tough.

Second, raise your hand if you think that food will be cheaper if it’s sold to you directly by the farmer, cutting out the middle man, and not having to be shipped halfway across the country. Yep, that’s what I thought too. Common sense would tell you that if a local farmer can sell food directly to the consumer without needing to wholesale to a grocery store and ship up their product that it would be cheaper than the store. Wrong. I know that depending on the size of the co-op, your location, and the membership size that this may differ, but I was in for quite a shock when I went shopping for the first time.

A dozen eggs were $4.00. A pound of bacon was $8.50. A head of iceberg lettuce was a shocking $3.00. To give you an idea, I can get the those at the supermarket for $1.49, $3.00, and $0.99 respectively. I know, I know, but you’re supporting local farmers and this stuff is probably organic, right? That’s true, but I can actually still get the organic equivalents of those items for less than the co-op right at the grocery store.

Finally, our co-op only has one pickup time and a small ordering window. You have to place your order on just Saturday or Sunday. Then your order can only be picked up on Wednesday in a narrow window of 5:15 pm - 7 pm. This makes it tough because you have to plan on the weekend what you’re going to need, realize you can’t even get it for three more days, and then make sure you’re available in that 2 hour window on Wednesday to pick it up. It’s certainly doable, but it isn’t the most convenient thing in the world.

The Verdict

I think deciding whether a co-op is right for you will depend on a number of things. Do you value the local aspect of it while that may put a premium on the food? It is probably still worth it. If you’re more casual in that approach and are a little more budget conscious, you may find it isn’t as worthwhile. While I’d love to put money directly in my neighbor’s pocket, I’m not going to buy hamburger for $5.00/lb. If I were to do most of my shopping through the co-op my weekly grocery bill would easily increase by 200-300%. So for me, I think I’ll stick to just getting the occasional seasonal fruits and vegetables as they become available while still doing the bulk of the grocery shopping at the store.

So, it’s certainly worth checking out. You can look for a listing of local cooperatives in your area on this site. As long as you know what to expect, how much it will cost you, and who you’ll actually be supporting, you can decide if it’s something that’s worthwhile.

Even though the contest ended Monday morning, I’m a little behind in getting all of the entries gathered. There was a lot of interest so it’s taking some time to make sure all the valid entries get accounted for.

Later this weekend I’ll be contacting the winners directly. If your winning entry was from the newsletter signup, you’ll receive an email from me. If you win via a Twitter entry, I’ll send you a direct message on Twitter.

After the winners are selected I will post the results here. So, thanks again for all of the entries. I look forward to sending out all of the prizes.

I occasionally get questions from readers and try to answer each one to the best of my ability, but there are some questions that get asked more than others. For these types of questions I like to turn it into a post so that it can help even more people.

One of the questions I get a little more frequently than others has to do with emergency funds and credit cards or lines of credit. We always stress the importance of building up an emergency fund, but it can sometimes take a while to get to that three, six, or eight month target. So, people often wonder if it’s acceptable to work with a relatively small emergency fund while holding on to a few unused credit cards or a line of credit to make up the difference. So, what’s the verdict on credit cards and emergency funds?

Using Credit vs. Savings

Even if you have unused credit available to you in the event of an emergency it’s still vital that you build up a cash emergency fund. While it’s a good idea to have a credit card without a balance out there and ready in case something does come up, this should be an absolute last resort and not even thought of as part of your emergency fund. There are a few reasons why using credit over savings could be harmful.

First, cash is money that you have and credit is money that you don’t have. If something comes up and you have to find some money to pay the bills or other unexpected emergency, if you use cash you’ve saved you’ve immediately satisfied that need. On the other hand, if you pay off that expense with a credit card, you haven’t relieved yourself of that expense. All you’ve done is basically delayed the payment. And for that convenience you’ll be charged interest. So, cash eliminates the emergency, credit just delays it.

Second, you could be making the situation worse by introducing a new monthly expense which comes in the form of the credit card payment. Let’s say you have a $5,000 emergency come up. If you have that money set aside in savings it’s a quick one-time payment and you won’t have to think about it again. But if you are forced to use a credit card to pay that $5,000 you’ve only transferred the emergency from the initial bill to a credit card and will begin with monthly payments. A $5,000 balance on a credit card could easily amount to a $100-$150 monthly minimum payment. If your budget allows, that might not be a problem. But if your emergency extends for very long you could find yourself suddenly in a bigger emergency when you can’t make the minimum payments on that credit card.

Secured vs. Unsecured Debt

Make sure you understand the difference between the two when using credit to get through an emergency. A lot of people tend to treat their home equity loan or home equity line of credit as an emergency fund, but this is a bad idea. This is secured debt, which means the money you borrow is backed by an underlying asset–in this case, your house. When you can’t pay off a secured debt the bank can take the property back.

Just like in the credit card example above, if an emergency comes up such as a job loss and you tap into a home equity line of credit to keep things going for a few months, you’ve essentially just put your house on the hook for your emergency. Now, you not only have a mortgage payment on your house but a home equity loan payment, so what happens if you can’t find a job as quickly as expected? Sooner or later those monthly line of credit payments may be impossible to pay so now your financial emergency just expanded and puts you in a position where you could lose your house.

If you must rely on credit to get through a financial crisis, make sure you tap unsecured debt like credit cards first. Sure, you’ll pay a higher interest rate and may not have as much credit available, but the damage done in the event of a prolonged emergency can be minimized.

Consider Your Options Carefully

It’s ok to temporarily have some available credit out there as an added safety net if a true emergency arises, but it should in no way substitute for actual savings. Just because you have about two months worth of savings set aside and four months worth of expenses available in the form of credit doesn’t mean you have a six month emergency fund. It may be good to know that in a worst case scenario that you have that going for you, but you should still be working to build up the cash in your savings. Don’t stop saving just because you have a little bit saved along with a sizable unused credit line.

Credit can work in a pinch, but don’t get complacent and fall back on your savings. And also make sure your savings is working for you. I know interest rates aren’t as good as they used to be, but you’ll still want to earn a little bit of extra money in the form of interest so stick with a high-yield savings account if you can. Then, make sure you’ve created an automatic savings plan so that you have money going into the account each week, bi-weekly, or monthly. When you put your savings on autopilot you won’t even have to think about it, and before you know it you’ll have enough cash set aside that you won’t even have to think about using credit to get through an emergency.