Your pay raise + Consumer Price Index = You are poorer.
Here is just another quick example of why you can not depend on "typical" pay raises from an employer to improve your standard of living. Rather you must find other ways to increase your earnings or reduce your costs in order to financially move ahead each year.
The Bureau of Labor Statistics reported last week that the Consumer Price Index (another way of looking at inflation and prices of things you typically buy) was 2.1, meaning that the average price of typical consumer goods increased by 2.1%. This increase was driven primarily by increases in the price of food and gasoline. Conversely, pay increases only averaged 1.7%. Unless some of your own costs were eliminated or lowered, this means you got poorer if you received the average pay increase (or less!). The two links below take you to stories demonstrating what happened.
The Consumer Price Index is a measurement that makes it easier for us to know if prices of goods are going up or down. Any "index" is a mix of similar items put together for the sake of measuring their overall affect. According to the Bureau of Labor Statistics the Consumer Price Index includes:
* FOOD AND BEVERAGES
(breakfast cereal, milk, coffee, chicken, wine, full service meals,
* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
* APPAREL (men's shirts and sweaters, women's dresses, jewelry)
* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
* RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
* EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
* OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
How do you beat inflation if you are receiving average (or lower) pay increases? Acquire new job skills that employers pay more for, negotiate higher pay with a current employer, get promoted to a higher paying position, get the same job with a new employer who pays more, get lower interest rates or better terms on your loans, eliminate interest payments on debt, or reduce / eliminate other expenses in your household.