You Might Get a 4.6% Raise in 2023 -- but Will It Be Enough to Cover Your Costs?

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  • New data reveals that workers could see a nice amount of wage growth in 2023 (an average of 4.6%).
  • Employers' anticipated average raise might still fall short of inflation levels, which were at 7.7% in October.

Don't get too excited just yet.

If you're not so thrilled with your paycheck right now, here's some potentially good news. A new report by Willis Towers Watson reveals that employers plan to implement pretty significant wage hikes in 2023. In fact, overall salary increases in the U.S. are expected to rise 4.6% in the new year, up from 4.2% this year. 

Not when we compare that to the typical cost-of-living raise in the past, which has usually hovered around 3%, a 4.6% bump seems mighty generous. But when we compare that average raise to the recent rate of inflation, it gives workers less to celebrate. 

Will your raise keep up with inflation?

Inflation has been soaring for well over a year, and it's put a strain on many consumers. Since mid-2021, many people have increasingly racked up credit card debt and dipped into their savings accounts just to cover their basic expenses.

The good news is that in October, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, only rose 7.7%. And to be clear, 7.7% is a big jump, but it's a much lower jump than what we saw in September, August, and July. 

The bad news is that if wages increase 4.6% on average in 2023, but inflation holds steady at 7.7%, it means workers won't gain any buying power. Rather, they'll continue to lose buying power as many did this year. 

Even if inflation levels start to come down in 2023, it will take a pretty substantial dip to bring the CPI down to somewhere in the vicinity of 4.6%. So chances are, a lot of people who see their wages go up that much will still struggle to cover their costs.

How to get ahead of soaring inflation

It could be quite some time until inflation levels start to shrink. If your paycheck is getting a lift next year, but only a modest one, you may need to rethink some of your spending to ensure you're able to make ends meet without running the risk of debt. 

Take a look at your various expenses and categorize them into essential spending versus non-essential. Then, as necessary, make cuts from that second category to buy yourself more breathing room.

At the same time, you may want to consider getting yourself a side hustle to boost your income and make your expenses easier to keep up with. This is an especially smart move if you're getting a raise in 2023 that's lower than 4.6%, or, worse yet, no raise at all.

The fact that employers are planning to raise wages by 4.6% in 2023 is really a good thing. And under normal circumstances, that would actually be a pretty generous bump. 

Unfortunately, due to inflation, a raise of that level may not go very far. And so if you're worried about keeping up with your bills, it may be time to make a few lifestyle changes and take on a second job until the cost of living starts to come down in a meaningful way.

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