If you’re kicking off 2022 with a raise, you’re in a better position than those who aren’t seeing their pay go up. Unfortunately though, that doesn’t necessarily mean you’re all set financially.
It’s common practice for companies to give out a uniform cost-of-living raise to employees so they’re able to retain their buying power as consumer prices increase. And the Conference Board reports that this year, the average pay raise will amount to 3.9%.
That may seem like a generous bump at first glance. But let’s also remember that in November, the last month for which Consumer Price Index inflation data was available, the cost of common goods was up a whopping 6.8%. That’s a high enough spike to render even a generous 3.9% raise inadequate.
If you’ve gotten a raise this year but it’s not enough money to keep up with inflation, here are three ways you can cope.
1. Dip into your savings
Generally speaking, you don’t want to have to tap your savings to cover everyday bills. But right now, consumer prices are up in a big way, and so it’s not unreasonable to take a little money out of your savings account in order to stay afloat.
That said, you don’t want to start rapidly depleting your savings to keep up with your living costs. It’s one thing to withdraw $50 or $100 a month to keep up with your bills, but it’s another thing to remove $50 or $100 every week. If you’re looking at the latter scenario, you may need another game plan.
2. Rework your budget
There may be expenses in your budget that you can eliminate or cut back on temporarily. Take a look at your various spending categories and figure out which ones give you the most wiggle room.
If you’re midway through an apartment lease, you may not have many options for lowering your housing costs. But if you typically spend $200 a month on restaurants and takeout, you can cut that figure in half and use the remaining money to keep up with higher gas and utility bills. Or, you can look at canceling your $75-a-month cable plan for now and replacing it with a much cheaper streaming service.
3. Get a side hustle
If your raise isn’t helping you pay your bills in full, you may need to give your income an additional boost. And a side hustle could be your ticket to doing just that.
There are many options you can look at for getting a second job, so think about how flexible your schedule is and whether you’re willing to commit to preset hours at a side gig. If you’re not, you still have plenty of roles to explore where you can set your own hours, like driving for a ride-hailing company or taking on data entry projects that you do at your own pace.
While a modest raise is better than no raise at all, that pay boost may not be enough to make your living costs manageable given the recent rate of inflation. If that’s the case, don’t resign yourself to debt when there may be other solutions to explore. Rampant inflation won’t last forever, and if you’re willing to make some sacrifices in the near term, you’ll put yourself in a better position to get through the next few months without racking up debt.