Your boss bumped up your pay at the end of last year. Now you’re coming into 2023 with a slightly bigger salary to help you tackle your everyday expenses, which seem to have higher price tags than ever.
Before you get too confident, you should take a closer look at your paycheck. How big was your raise, really? Did it even cancel out the effects of inflation? Find out why the answer to that question is probably “no.”
The Average Raise
A general pay raise typically gives employees a 3% increase. In 2022, employers doled out an average of 4.6% pay raises to their staff. While a 4.6% raise is a nice boost in comparison to the usual 3% raise, it’s still not very high when you consider the impact of inflation.
One of the biggest ripple effects of the COVID-19 pandemic has been skyrocketing inflation rates. The inflation rate peaked in June 2022, at 9.1%. It steadily dropped from that point, coming down to approximately 6.5%. To give you a better perspective, the interest rate in January 2020 was only 2.5%.
A 4.6% pay raise can’t help you compete with a 6.5% inflation rate. Even if your wages have grown, your regular expenses have grown even larger. If you take this factor into account, you haven’t climbed further up the economic ladder. Unless your raise was higher than inflation, you’ve actually gone down a rung.
The Inflation Crunch
Why is this such a problem? Well, not only does it slow down your financial growth, but it also makes it more challenging to cover your everyday expenses. You might’ve noticed the dramatic increase in prices for your usual expenses, from the fuel sitting in your car to the groceries sitting in your fridge. If you were already on a tight budget in 2022, you’ll struggle more in 2023.
A tighter budget could push you into a precarious financial situation. You could accidentally put your checking account into overdraft. You could bounce a check. At the very least, you could drain all your savings and leave yourself with nothing for emergencies.
Without any savings, you might not have an easy way to cover an emergency expense. You might have to consider an alternative solution, like going to CreditFresh and checking to see whether you meet all of the requirements for a loan. If you do, you can apply for the loan online. With an approved loan, you can use temporary funds to manage the expense in a short amount of time. Once the expense is completely paid off, you can repay the online loan through a monthly billing cycle.
This is not an ideal financial situation to be in. It would be much better if you had enough income to manage all of your expenses without trouble, even the emergency ones.
What Can You Do?
Reassess Your Budget
One of the first things you should do is reassess your personal/household budget. Adjust your spending categories to match this year’s price points — they could be significantly higher. You may need to reduce or eliminate other categories so that you can comfortably manage these adjusted expenses. For instance, you might want to cancel streaming subscriptions or gym memberships. The funds saved from these cancellations could accommodate the price increases for other essentials.
Negotiate Your Pay
If you’re not happy with your pay raise, you could talk to your employer about it. Discuss how it doesn’t account for the inflation rates or for the work experience you bring to the table. They could be open to giving you a better offer.
Look for Work Elsewhere
If you don’t think your employer will give you a bigger pay raise, you might have better luck with a new employer. This could be a sign that it’s time to start a job search. You could find job opportunities offering you much more than your current salary, giving you a boost beyond the 6.5% inflation rate.
Whatever you do, don’t quit your current job in order to dive into a job search. Finding a new job can take weeks, even months, to complete. You don’t want to leave yourself without a steady stream of income while you’re submitting applications and taking interviews.
Your pay raise may not be as helpful as you thought. It’s time to take a closer look and find out the truth!