Inflation has outpaced income: financial advisor explains why

Published: Sep. 21, 2023 at 3:29 PM CDT|Updated: Sep. 22, 2023 at 8:57 AM CDT
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BISMARCK, N.D. (KFYR) - You probably don’t need a statistic to tell you inflation and the cost of living has outpaced wage growth. It’s something everyone’s feeling, from food and gas to big-ticket items.

Whether you work in tech or a fast-food joint, you’re probably feeling the pinch in your pocket.

“Well, it makes a guy feel like you’re going into a hole. You want to save for the future, and it’s pretty tough unless you get a really good job,” said Keith Kraft, Fargo resident.

Reputable sites show the median U.S. home price increased 65.9 percent from 2010 to today. The average cost of rent in North Dakota for a one-bedroom apartment increased by 60.8 percent in that time. The average cost of a new car has gone up 96.4 percent.

Meanwhile, the median North Dakota income has only increased 19 percent from 2010 to 2021, which is the most recent figure from the Census Bureau.

“Overall, the economy is actually expanding. Albeit, it’s not expanding as fast as the rate of inflation,” said David Wald, managing partner at Lux Wealth Advisors in Mandan.

Wald has been a financial advisor in North Dakota for 23 years. He says because of rising costs, it’s getting harder and harder for people to follow basic financial principles.

For instance, the 50/30/20 rule is a budgeting technique in which you divide your take-home pay into three categories: 50 percent to needs, 30 percent to wants and 20 percent to savings and debt payments. But because of rising costs, people are spending more on needs than they can afford.

“What’s happened is you’ve had to stretch that 50 percent, a lot of times 65 percent. The problem is, is when you don’t have enough money to stretch that, and you need those items, it goes on a credit card,” said Wald.

With more debt and less disposable income, people, especially young people, are having to forgo saving for emergencies and retirement.

“We’re seeing less and less people starting to save for retirement at a younger age. They’re delaying that further because everything is competing for their dollar. If they’re not living with mom and dad and they’re out on their own, now you’ve either got rent or a house payment. You’ve got your auto payment,” said Wald.

You may feel like life has become harder to afford, but the Bureau of Economic Analysis indicates the economy is growing, and forecasts show recession is unlikely.

Wald says the only thing to do if you’re feeling the squeeze is to cut where you can: cut out trips to eat out and cancel those unnecessary subscriptions.