You Just Took A 5% Decrease In Pay!

Each month, we check the latest CPI numbers to see how things are looking. In July, we made a video about the numbers for June—and they were pretty interesting. Let’s go over what the CPI index is and whether or not you just took a 5% decrease in pay at your job.

CPI stands for Consumer Price Index. It’s essentially a measure of how much inflation we experience over a given time. The index takes multiple market baskets and looks at how much each one has increased in price over a one-month period, giving us the total level of inflation.

Here’s where things start to get a little concerning. In June 2021, the CPI rose by 0.9%. This means inflation rose by almost an entire percentage point in a single month. The CPI also provides year-over-year numbers. In the previous 12-month period, inflation has gone up by 5.4%. The category that experienced the most inflation was energy, which rose by 24.5% in the last year alone!

So prices are up over 5% from where they were a year ago, meaning your hard-earned cash buys 5% less than what it did this time last year. Another way to think of it is that you took a 5% decrease in pay without realizing it. This demonstrates why it’s so important to use some of your money as a hedge against inflation. How? By creating a well-diversified portfolio invested in stocks.

Do you have any questions about hedging against inflation? Could you use help setting up an investment account? Feel free to call Nelson Financial Planning at 407-629-6477 or contact us online to schedule a free consultation with a certified financial fiduciary. We’re always here to help.