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🧐 With inflation being top of mind lately, I really enjoyed Nick Maggiulli’s article titled You’ve Been Thinking About Inflation All Wrong. Nick makes the point that keeping up with inflation is much more nuanced than simply getting a raise that is equal to the Consumer Price Index (CPI). If you are a heavy saver, then you need less of a raise to cover an increase in spending than a person who is living paycheck-to-paycheck, which makes sense.
However in his article, Nick does not consider 1) the impact of income taxes on how much of a raise is required, and 2) the fact that just getting enough of a raise to cover your increased spending will diminish your savings rate over time. #2 is super important because your savings rate is the single factor that determines your timeline to financial independence.
To expand on Nick's concept, I built a Keeping Up With Inflation Calculator which calculates how much of a raise you need to keep up with inflation and adds these additional factors of marginal income tax rate and maintaining the same savings rate that you had initially.
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🥑 I know comparison is the thief of joy and all, but I think benchmarking your net worth against your peers is a good to way to get some perspective on your progress and appreciate how you are doing in this age of fake wealth on social media, which is apparently now a whole industry. Anyways, in his piece titled The Average Net Worth Of Millennials By Age, The College Investor put together net worth numbers for average and high-achieving millennials based on data from the Federal Reserve. While I feel like these numbers are a bit low, his methodology makes a lot of since when considering stats from the federal reserve and average student loan debts. I put together this table with the data at-a-glance, but check out his full article for details on how Robert put together the net worth benchmarks.
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