[SirMaster]

This never made sense to me. Doesn't this assume you are spending ALL your income though?

If I make 100K and get a 3% increase, that's $3000 more.

But if I only spend 30K to live, and my living expenses go up 5%, that's only a $1500 increase to my living expenses while I earned $3000 more that year. So how is that a pay cut if I actually have even more money left over that basically just goes into my investment account then.

[recursivecaveat]

The dollars going into your account are worth less than before. The ultimate destiny of all money is to be spent on goods/services eventually, and the amount of goods/services your salary can purchase is net (5-3)% less than the year before. Invested, spent, willed, donated, it doesn't matter, the money is already worth 2% less when it enters your hands. (Worth noting that CoL increase is not exactly equal to inflation, you could experience a local CoL increase without inflation if say your town becomes a popular destination which raises rents)

[Bilal_io]

It's about the worth of what I am receiving from my employer and nothing to do with spending it.

If John makes $100k and lives on $10k, then cost of living increases by 100%. I believe John should be paid $200k, and according to you his salary should go to $110k.

[bluGill]

> Doesn't this assume you are spending ALL your income though?

Why wouldn't you be? You will die, and the vast majority of religions (including atheism) don't let you take it with you. Sure there is some saving for a rainy day or retirement. However why are you earning more than that? If you need a job for social reasons only there are plenty of volunteer jobs that can provide that.

[SirMaster]

I save for retirement yes. I only spend about 30% of my income to live and other other 70% I save for retirement.

I don't feel like I'm being cheap or limiting myself. I have hobbies that I enjoy, computers, home theater, pickleball, scuba diving, hiking, biking. I travel a lot for fun, backpacking and trips around the world to see cool cities, hike mountains and experience different cultures.

I don't find my job particularly demanding or stressful, it's flexible, the people I work with are nice. I just spend what I feel I need to spend to do what I want to enjoy myself and the rest I put in investments.

I know I can't take it with me, but it just means I will be able to retire that much sooner.

I get a 3% raise every year as the default, aside from promotions and such, and the amount it gains me is about 3x higher than my cost of living increases have been these past years, so it really does not feel like I am making less. I am living my same life that I enjoy and saving a bit more and more each year.

[pibaker]

Do you have children?

[danaris]

But a huge percentage of Americans are spending all, or approximately all, of their income. (I don't know offhand if it's technically a majority, but if not, then it's not far under 50%.)

And these are the people who are going to be most affected by inflation and other price shocks.

[dlandis]

You are exactly right. You are most likely not getting a pay cut just because your raise doesn't match inflation. It totally depends on how much of your money you are spending and what you are spending it on.