How Much Should Costco's $1.50 Hot Dog and Soda Combo Really Cost Based on Inflation?

Many people love Costco for its low prices on groceries and everyday essentials. And shopping there can easily result in a lower credit card tab than shopping at big-box and grocery stores.

But it's not just the items found on Costco's shelves that its customers have come to love. There's also the Costco food court, which is known as a great place to grab a filling lunch on the cheap.

In fact, if you're really not looking to splurge on lunch, you can always pick up a famous Costco hot dog and soda combo for only $1.50. That's truly a bargain. But the reason Costco's hot dog and soda combo is so cheap is that the warehouse club giant hasn't changed its price since introducing it almost 40 years ago.

What Costco's famous food court combo should really cost

Costco first introduced its $1.50 hot dog and soda combo in 1985. Based on inflation, that combo should cost $4.25 today. The reason it doesn't is that Costco has effectively pledged to keep that $1.50 price point in place forever, or for as long as it's sustainable. So even though Costco clearly could charge more for its hot dog and soda combo, it has no plans to do so.

There's no getting around inflation

Costco's hot dog and soda combo aside, inflation is something consumers have to prepare themselves for. And when we talk about inflation, we're not necessarily referring to the rampant inflation that's driven living costs up to an extreme over the past two years.

Rather, inflation is a natural thing that tends to happen over time, usually at a moderate level. In fact, the Federal Reserve itself is comfortable with 2% inflation on an annual basis because it feels that this level lends nicely to economic stability.

For context, in June of 2022, annual inflation was measured at 9.1%. That's by no means a normal level. And it explains why so many people had to constantly raid their savings accounts and rack up debt just to keep up with basic expenses.

For the most part, it's fair to assume that living costs will rise about 2% year over year. But there could be periods when costs rise at a faster pace than that.

How to combat inflation in the short and long term

Some employers give out raises to account for cost of living increases. But that's not always the case, so a good way to protect yourself from near-term inflation is to not spend your entire paycheck on bills, but rather leave yourself some wiggle room. That way, if your costs rise from one year to the next but your wages don't follow suit, you'll be okay.

When it comes to long-term inflation, your best protection against that is to build up a retirement nest egg and invest your savings heavily in stocks. Over time, the value of a dollar is apt to erode, but you'll need the money you set aside today to grow into a larger sum so you have ample buying power during retirement. And since the stock market has averaged an annual 10% return (note that this number doesn't account for inflation) over the past 50 years, it's a good bet if you want your retirement savings to outpace inflation.

Costco's $1.50 hot dog and soda combo could clearly cost a lot more than it does. But while that price may hold steady through the years, other prices won't. Spend, save, and invest strategically so that's not a problem.