Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / How Inflation Is Quietly Eating Your 2026 Raise
Transcript
- Lucas: So it's late July 2026, and if you're like a lot of people, you may have just gotten your annual performance review with a salary bump — or you're expecting one soon. But here's the thing: that 3 percent raise you were proud of? Inflation may have already eaten most of it. Luna: Yeah, I've been hearing that from friends. They get a 3 or 4 percent increase and think they're moving ahead, but then they look at their actual spending and feel like they're treading water. Lucas: Exactly. And the data backs it up. The latest CPI reading from June sits at 332.6 — that's down slightly from 333.98 in May, so inflation is cooling, but it's still positive. The broader PCE price index, which the Fed prefers, actually ticked up to 131.5 in May. So the cost of living is still rising. Luna: So what does that mean for someone with a 3 percent raise? If inflation is running somewhere around — what — 2.5 to 3 percent, your real wage gain is maybe half a percent, if that? Lucas: Right. The 10-year breakeven inflation rate — that's the market's expectation for average inflation over the next decade — is 2.2 percent as of yesterday. So even if inflation settles at that level, a 3 percent raise nets you only 0.8 percent in real terms. That's about $30 extra a month on a $60,000 salary. Not exactly life-changing. Luna: It's almost insulting when you factor in the actual cost increases in specific categories like rent, healthcare, or groceries. Those often run hotter than the headline CPI. Lucas: That's a key point. Headline CPI is an average, but your personal inflation rate depends on what you buy. If you're a renter in a city where rents are still up 5 or 6 percent, that 3 percent raise is actually a pay cut. Luna: So what can someone do besides just hoping for a bigger raise? I mean, asking for more is easier said than done. Lucas: First, know that the job market is still relatively strong. The Russell 2000, which tracks small caps, is down a bit over the past week — but the broader indices like the S&P 500 are near all-time highs. Unemployment is low. That gives you some leverage if you're in a high-demand field. Luna: So negotiate, but also look at total compensation. Maybe the base salary is only one piece. Bonuses, stock grants, better benefits — those can also help offset inflation. Lucas: Absolutely. And there's another angle: the Fed has held the federal funds rate at 3.63 percent since June. That means high-yield savings accounts and money market funds are still paying around 3.5 to 4 percent. So if you stash your raise in one of those, you can actually earn a positive real return after inflation — at least for now. Luna: That's a good point. But what about people who don't have extra cash to invest? They're just trying to cover their bills. Lucas: Right. For them, the focus has to be on controlling personal inflation. Can you negotiate your rent? Shop around for insurance? Cut subscription costs? The little things add up. We've covered a lot of those specific areas on previous episodes, like streaming services and insurance premiums. Luna: Yeah, listeners should check those out if they missed them. And also — and I don't want to sound like a broken record — but if our money conversations have helped you think about your raise or your budget differently, maybe consider supporting the show. Lucas: That's actually a great segue. We keep this podcast ad-free because of listeners who chip in. It's a small gesture that makes a big difference for us. If you're able, you can head over to buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. No pressure — just if the show adds value to you. Luna: Yeah, and we really mean it. It helps us keep doing deep dives like this one. Okay, back to raises — so Lucas, what's your advice for someone who wants to actually get a raise that beats inflation? Lucas: Know your market value. Sites like Glassdoor, Levels.fyi, or even talking to peers can give you a sense of what people with your role and experience are making. Then come to your manager with data, not just a request. Say, 'I've been hitting these metrics, and the market rate for this position has increased by X percent due to inflation.' Luna: That's smart. Use the same inflation data we just talked about to build your case. Show that a cost of living adjustment isn't even a real raise — it's just maintaining your buying power. Lucas: Exactly. And if your employer can't match that, consider looking elsewhere. The biggest raises often come from switching jobs. With the labor market still tight in many sectors, you might find a position that resets your income at a higher level. Luna: But that's not always feasible, especially for people in smaller towns or with fewer options. So what about protecting the raises you already have? Lucas: That goes back to budgeting and investing. If you get a raise, automate a portion of it into savings or investments before you even see it in your checking account. That way you don't inflate your lifestyle, and your money has a chance to grow faster than inflation. Luna: Great advice. So to sum up: your 2026 raise might look good on paper, but after inflation, it's probably a lot less. Don't assume you're ahead — check your personal inflation rate, negotiate if you can, and put any extra cash to work. Lucas: And keep an eye on the data. The Fed is watching PCE and CPI closely. If inflation continues to ease, real wages will start to recover. But if it sticks around, we may all need to rethink how we define a 'good' raise. I'm curious — are you planning to renegotiate your salary this year? Luna: I actually just did. Got a 4.5 percent bump, but after looking at these numbers, I'm already thinking about planning for the next conversation. This episode might have convinced me to ask for more next time. Lucas: That's the spirit. We'll be back next time with another angle on how inflation quietly affects your money. Until then, keep your purchasing power front of mind.