What Is a Wage Inflation Calculator?
We created this wage inflation calculator to help you track your wage against inflation over time. Inflation acts like a hidden tax which erodes the buying power of your income and savings and can eat away at your long-term financial goals.
This wage inflation calculator will help you find the real value of your salary and to help you set goals to take action and grow your wealth over time.
How to Use Our Wage Inflation Calculator
Our inflation calculator is fast and easy to use. To begin, enter your starting salary, the year you started working, and your current salary. The inflation calculator will then tell you how your wage has grown relative to several different inflation metrics. Often even though your wage has increased in nominal value, the value of your income may have decreased in real terms.
What Is Inflation and How Does It Work?
Inflation is a decrease in the purchasing power of your currency. It happens when the supply of currency increases faster than the supply of goods and services. When more currency is available, each unit of currency is worth less.
Inflation reduces the value of your income and savings, which means you need more money to buy the same goods and services. This makes it more difficult to achieve your financial goals.
Learn more about inflation here.
Are Inflation Calculators Accurate?
Many wage inflation calculators rely on CPI alone as a measure of inflation. While CPI is a good measure of inflation for certain living costs, it does not consider the cost of various other assets that can also increase in value.
For example, if you invested in real estate, the price of real estate could increase significantly over the same period of time that the CPI increases by only a small percent. This is why many experts recommend looking at asset inflation in addition to CPI to get a better idea of your purchasing power.
We have designed our wage inflation calculator to compare the buying power of wages to several different asset classes, including equities, real estate, and gold, in addition to CPI.
Why Use a Wage Inflation Calculator?
You can use wage inflation calculators for a variety of purposes. For example, suppose you're trying to negotiate a new salary. In that case, an inflation calculator can help you determine the actual value of the wage in terms of your purchasing power.
If you're trying to keep up with the cost of living, a wage inflation calculator can help you determine how much your income should increase to stay on top of inflation.
Finally, if you're trying to buy a home, an inflation calculator can help you determine how much your wage needs to increase to keep up with the rising cost of real estate.
How to Protect Your Wage From Inflation
You can protect your wage from inflation by negotiating ongoing pay raises with your employer. By negotiating pay raises with your employer you can ensure that your income increases each year in line with your cost of living.
You can also protect your wage by investing a portion of your wage or savings. If you invest your money, you can protect against the loss of value which affects your currency. Even better, if you invest properly, your savings will grow faster than inflation allowing you to have more purchasing power each year.
Learn more about investing here.