Description: Personal finance topics, tips, and education for beginners and the advanced alike
Unless you plan to live with an ever-diminishing standard of living, you probably can’t do what all the personal finance blogs and books tell you to do - save your raise and live on your previous salary.
It’s another one of those personal finance ‘rules’ that is great in theory, but unrealistic in practice. We’re told by many sources to save any salary increase we earn and live on what we were making. This advice is usually accompanied by a statement like, “and in 30 years, if invested in an stock index mutual fund, it will be worth 5 zillion dollars!”
You see, the reason this is stupid advice is that if you’re like the vast majority of taxpayers in the US, your real salary has likely gone down over the past 10-15 years. (The term ‘real salary’ refers to your inflation-adjusted salary. If you get a 4% raise and inflation is running at 5.6%, you’re making less money every month in real terms.)