In the latest compensation-planning cycle, average U.S. salary budgets were projected to rise by about 3.7%–3.9%, while recent inflation readings were closer to around 3% on commonly cited consumer-price measures. On paper, that still looks like progress: pay increases roughly keeping pace with price growth.

Yet plenty of households still feel squeezed, juggling higher bills, debt, and stalled savings. The gap between statistics and real life demands a closer look.

Short Term View

Over the most recent year, wage gains have generally matched or slightly exceeded inflation by a modest margin. That means, in theory, purchasing power should be improving at the edges. For some workers in strong industries, that improvement shows up as a little more breathing room in monthly budgets.

However, snapshots can mislead. Looking only at the last 12–24 months ignores what happened earlier in the decade, when prices jumped much faster than pay. The time frame used to compare wages and inflation changes the story dramatically.

Long Term Catch-Up

Zooming out to the last five to seven years, cumulative price increases have often felt faster than salary growth for many households. The sharp surge in 2022, driven by supply disruptions and rapid price increases, hit budgets hard. Households turned to credit cards, paused saving, or dipped into investments just to keep up with everyday costs.

Even if pay raises now slightly exceed current inflation, many people are still patching the holes left from that period. Higher balances, drained emergency funds, and deferred goals mean today’s income is often committed before it arrives.

Uneven Pay Growth

Average numbers also hide big differences between sectors. Skilled trades and some construction-related roles have seen robust wage growth as demand stays strong. Workers in those fields may feel the benefit of today’s raises more clearly.

Other areas, such as parts of education and segments of healthcare, have lagged. When both earners in a household work in slower-growing sectors, the combined income may not keep pace with rising rents, childcare, or medical costs. The same inflation hits everyone; the pay response does not.

Debt And Mobility

Another drag on progress is rising household debt. During high-inflation years, many families leaned on credit to bridge shortfalls, and those balances do not vanish just because current inflation is lower. Larger monthly payments can quietly swallow much of a raise.

Job mobility also matters. Slower hiring in some areas, plus revisions to job-growth data, make many employees feel less confident about changing roles. Without the ability or willingness to move to a better-paying position, wage growth may be limited to small annual adjustments that barely move the needle.

Why It Still Hurts

Even when salaries technically outpace inflation, increases can feel underwhelming. Housing costs may have jumped far more than the general price level in certain regions. Insurance, utilities, and groceries have also re-based at higher levels, so a single-digit raise can disappear quickly.

Psychology plays a role too. When people spend several years feeling behind, a small positive shift rarely feels transformative. The lingering stress of trying to catch up can overshadow incremental financial improvements, especially if savings goals remain off track.

Ask For More

If pay feels stuck, the first lever is often negotiation. Preparing a clear case—documenting achievements, increased responsibilities, and market salary data—gives a stronger basis for requesting a raise. Timing the conversation around performance reviews or after major wins can also help. If internal raises are limited, exploring roles at other organizations may be necessary. Many workers find that the largest pay bumps come from strategic job changes rather than staying put for years.

Add Extra Income

When base salary cannot move quickly enough, additional income streams can help close the gap with living costs. Freelance work, consulting, tutoring, or small service-based projects can be built around existing schedules.

Online platforms and direct outreach on professional networks make it easier to test ideas with low upfront cost. Even a modest side income, if directed toward debt reduction or investing, can significantly change long-term financial outcomes.

Spend With More Intent

Cutting costs isn’t only about willpower—systems matter. Dilip Soman, a behavioral scientist, said that adding a brief cooling-off period—creating a little friction—can encourage more thoughtful choices and reduce spur-of-the-moment purchases.

Small guardrails like waiting a day before nonessential buys can make it easier to protect cash flow while you rebuild savings.

Protect Your Savings

Income isn’t the only lever. Where savings are parked matters too. High-yield savings accounts, money market funds, or other relatively low-risk vehicles can help cash keep up better with inflation than traditional low-interest accounts.

Automating transfers into these vehicles ensures that part of each paycheck is working harder, even if investment contributions are still small. Over time, higher interest earnings support emergency funds and future goals, helping offset the long shadow of past price spikes.

Conclusion

Recent data can make it look like salaries are slightly ahead of inflation. In reality, many households are still dealing with the aftereffects of earlier high-inflation years, uneven wage growth across industries, and heavier debt loads. Small raises can feel thin when stacked against higher baseline costs and delayed financial progress.

The path forward is practical and incremental: push for pay where you can, look for realistic ways to add income, strengthen skills over time, and place savings where it can earn more. Those steps won’t change everything overnight, but they can steadily rebuild breathing room.