It never stops going up, up, and up.
By international estimates and comparisons, the United States doesn’t have it quite as bad as other industrialized nations when it comes to rent, utilities, and food prices.
You can cut corners in certain areas, but other things you just can’t do without like gas or medical supplies.
For folks living on a fixed income, increased living costs could mean draining your savings or seeking part time work to supplement your benefits.
Cost of living comparison over time
It’s impossible to discuss this comparison without looking at minimum wage, salary, and cost of living.
Minimum wage was originally designed to increase as living costs increase. However, the minimum wage has gone up less than 25 times since it was introduced in 1938 – even though costs of goods and services continue to increase.
Contrary to what lots of people think, minimum wage is not directly tied to inflation so there isn’t any set formula or set of rules for determining when wages should go up.
When you take median costs of rent, utilities, gas, and general inflation into consideration, minimum wage is statistically 25% lower than it was in 1968.
If you don’t work a minimum wage job or you had a well-paying job before you retire, you may not think this matters so much. In reality, a stagnant minimum wage means that other wages and benefits remain stagnant since employers often use the minimum to base wage levels and increases for other employees.
Inflation and the cost of living increase
Just like minimum wage, social security cost of living adjustments (COLA) have remained stagnant as well.
- Between 1975 and 1982, COLA teetered between 6 and 14 percent.
- From the early 80s to early 90s, it bounced around between 3 and 4 percent.
- From the early 90s to mid 2000s, COLA averaged between 1 and 3 percent.
- Since 2006, COLA has seen sharp increases and decreases. In 2008, it jumped up to nearly 6%, but most other years it was either completely non-existent or less than 1%.
Despite rising living costs and inflation, wages and COLA has not increased to compensate for this.
Cost of living comparison: how far will your income get you?
With benefits and wages at historic lows, you need to carefully budget your income and find ways to cut corners as much as possible.
Depending on your situation, you’ll either need to reduce your living costs or seek out alternative sources of income.
Here are a few options for making the most of your salary and cost of living – even with a fixed income.
If you’ve ever wanted to live in a new state or town, now is the time. Do you have family members in another state with lower living costs?
It sounds drastic, but people move all the time. No one said you have to move somewhere you’ll hate – find somewhere you’ll absolutely love.
Using this calculator, plug in your income and where you currently live. Select where you would like to live, and it will tell you the price differences along with how much money you’ll need to live there.
Look for a part-time job
Try searching for jobs in industries you’ve always wanted to try but never got the chance.
Are you a boating or hunting expert? Try your local outdoor shop. Love candy and food? Check out the chocolate store at the mall or a bakery.
Most retail jobs offer flexible scheduling with short shift options. If you’re good with computers, you could look for simple data entry jobs that you can do remotely from your own home. You could even use this as an opportunity to start a small side business doing what you love.
If you love to drive, don’t write off ridesharing jobs like Uber and Lyft. They’re flexible and you can make decent money.
Just make sure that getting a job won’t interfere with your social security or insurance benefits.
Cutting corners and down sizing
Sometimes, seeking out alternative income isn’t an option. Try to scale down as much as possible.
All the kids out of the house? You probably have lots of empty space.
If you love meeting new people, you could rent a room or space on Airbnb. Otherwise, consider selling the house and moving into an apartment. Plus, apartments have less space to maintain.
Going out for the weekend? Try to find events that don’t cost an arm and leg.
Always think ahead
Since you can’t rely on a cost of living increase, you need to build a budget and stick to it. Always avoid making any large purchases or financial commitments.