This inflation calculator will estimate how much your current annual salary will need to increase by during the upcoming year in order to keep pace with inflation.
The calculator will also take your current annual salary and create a year-to-year, inflation-adjusted comparison chart dating back to the year you were 16 years old!
I often hear people complain about how inflation is forcing them to earn higher and higher incomes just to maintain their current lifestyles.
Yet many of these same people make big-ticket-item buying decisions faster than I decide what I'm going to wear to work (I work at home!).
Plus, between mortgage payments, loan payments, and credit card payments, most are spending hundreds, even thousands of dollars a month just to pay for interest charges.
When you spend a dollar to pay interest charges, what do you really have to show for it?
The item you purchased on credit?
No! Because had you purchased the item with cash, you wouldn't have incurred any interest cost at all.
Therefore, you really have nothing to show for the dollar spent (actually less than nothing if you consider the lost interest earnings).
Pay a visit to your local lending institution (usually recognizable by being one of the nicest buildings in town).
When you enter the building, try to find a tangible product to purchase that isn't just a signed document.
Can you find an assembly line churning out tangible products? Can you find a Lay-Away counter? Are employees hanging around the front door to help you carry out your purchases?
Of course not.
Lending institutions simply rent the use of your money for a small fee, and then rent it back to you at a much higher fee. That's it. That's all they do!
So do I think lending institutions are evil? Absolutely not. Lending institutions provide a crucial role in providing start-up and operating capital to the businesses that create our jobs. It's not the lending institution's fault that expertly designed sales presentations entice us into buying on credit (instant gratification), instead of saving up to pay cash for our purchases.
The truth of the matter is, spending a dollar in interest only leaves you with one less dollar to spend (or invest). In other words, that dollar's buying power was reduced by 100%!
You worked just as hard for the interest dollar as the other dollars you earned, right? Yet you received nothing in return for it. Doesn't that bother you? As you can tell, it bothers me ... a lot!
The buying power bottom line? If you are one of those people who fail to fully investigate buying alternatives before you make your buying decisions, and/or you are paying hundreds or thousands of dollars in monthly interest charges, I'm sorry, but YOU are your buying power's worst enemy, not inflation.
With that, let's use the Salary Inflation Calculator to estimate what your income needs to be next year in order to keep pace with increasing consumer costs. The data for the calculator is based on the historical CPI (Consumer Price Index), as reported by the Bureau of Labor Statistics for the years 1913 to 2017.
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Current annual salary: Your current annual salary. Note that the calculator will also work as a wage inflation calculator. Simply enter your hourly wage in place of the annual salary.
Inflation: Basically, inflation is the rise in the price of goods and services over time. The inflation rate is an attempt to quantify inflation, and is based on the rise of the Consumer Price Index (CPI). Theoretically, if the inflation rate is estimated to be 4%, $1 will only be worth 96¢ a year from now. Or to put in another way, a product selling for $1 now will likely sell for $1.04 a year from now. Therefore, to make a more realistic financial plan, inflation should be considered -- though likely not at face value. After all, as prices rise, wages tend to also rise, thereby offsetting at least a portion of the effects of inflation.
Consumer Price Index (CPI): The Consumer Price Index is compiled by the Bureau of Labor Statistics (BLS). Each month the BLS releases an estimate of what it would cost to acquire the same basket of goods and services they have been tracking for past periods. The annual percentage change in the CPI is known as the inflation rate. A drop in the CPI -- which occurred in 2009 -- is referred to as, "Deflation."
Expected inflation rate: The expected inflation rate for the next year. In case you're wondering, the average annual inflation rate over the past 20 years (1997-2017) is roughly 2.15%.
Current age: The Salary Inflation Calculator will use your age to show what your currently salary was equal to in previous years, dating back to when you were 16 years old.
Salary needed to keep pace with inflation: This is what your salary will need to increase to next year in order to keep pace with inflation.
Raise needed to keep pace with inflation: This is the difference between your current salary and next year's inflation-adjusted salary.