Member Voices

Inflation squeezing your salary?

By Nicolai Oliden posted 05-19-2022 01:29 PM

  

It is no secret that the cost of goods has increased dramatically over the past couple of years. Inflation has put a squeeze on my income and if you’re still breathing, I assume it has for you too. I paid $75 to fill up my little car with gas this week. I was very used to that costing $40 or less. My family of five used to spend about $700 each month on groceries to eat comfortably. This month we will spend $1,400 on groceries and our eating habits have not changed. Inflation has significantly impacted what and how much I can buy.

I graduated in 2008. Since then, I’ve experienced many things beyond our control that impacted our financial situation. We can’t predict the future, but we can set ourselves up to handle most things that come our way. Here are three things I’ve learned over the years that have made this current squeeze very manageable.

1-Do a budget every month.

I’ve been budgeting for the past eight years. I’m not perfect and I can definitely tell a difference when I budget versus when I don’t. The first thing I do is write out all of my income. Then we list our expenses. Ideally your expenses are less than your income. If not, you will need to cut some expenses out. I remember early in my career how stressful it was spending more than I earned. If you have extra money, be intentional with it. Put it toward debt, savings, or fun depending on what you need.

2-Pay off your debts

Debt kills your income. I frequently get into debates with other engineers who overcomplicate their finances. They talk about borrowing or leveraging debts, which helps them make money somewhere else. I used to create complicated plans too because I thought it would get me ahead. After 14 years in my career, I have found that the best financial plans are the most simple plans. If you have student loans, car loans, etc., it’s likely you have $750+ worth of minimum payments each month. I haven’t had a nonmortgage debt for six years. Every dollar I earn I get to decide where it goes, and it feels phenomenal! I do save money every month for future cars, and that sometimes feels like a car payment, but I get to decide each month if I want to save it while my friends with car loans have to make their payments.

3-Save for emergencies

Most Americans cannot pay for a $1,000 emergency with cash. Having a solid three-to-six-month rainy-day fund is very smart. If you spend $3,000 per month on necessities (shelter, food, transpo, etc.) then you should save $9,000-$18,000. If that seems like a lot, you’ve probably never had a major medical emergency or owned a home needing repairs. If my two A/C units decide to break, it will cost about $15-20k to replace them.  My two daughters in the last six weeks have racked up $5,000 worth of medical bills (MRI, ER visits, etc.). Luckily we save money in an HSA, which helps with the medical emergencies. You don’t want too much cash sitting around, though. I had about $60,000 saved up in early 2021. That was allocated for my new car, home remodel, and emergencies. By the time we were ready to spend it, inflation made it feel like a lot less than 2020’s $60k. Once you get the Emergency Fund in place, there are other strategies you can implement for other savings.

There are more tips I’ve applied that hopefully I can share in a future post, but none of those will work as well as they can if you do not master these three.

Disclaimer: I am not a licensed attorney, accountant, or financial advisor. The information in this article is not a substitute for professional legal, tax, investment, financial, or other advice. It is expressly recommended that you perform your own research and seek advice from a licensed professional.

Nicolai Oliden is a roadway project engineer and office manager at Ethos Engineering. He has been active in ASCE as a Phoenix Branch Younger Member Forum officer for five years, including his term as president in 2017.

He graduated from Arizona State University in 2008 and considers himself lucky to work on transportation projects across the state of Arizona.

In addition to his work at Ethos, Oliden started his own company, EngineeringYOU, to help young professionals start their career on the right track. He teaches various leadership topics, leads personal development discussions, and is a financial coach.

You can find him at the engineeringyou.org website, social media, or contact him directly by emailing [email protected].

2 comments
55 views

06-14-2022 09:26 PM

Studies have shown that requiring people to opt out of retirement savings at work dramatically increases the saving rate, but in America such policies less common. Does your employer offer any matching funds? That'd be even more reason they should enroll all new employees and make them opt out if they so desire.

Over the weekend, I did the math on traditional IRA vs. Roth, and switched my plan to Roth. I also bought Treasuries. People complain about how they have to subsidize the poor, but I look at all the tax avoidance schemes set up by Congress and I think I'm getting a very good deal.

05-23-2022 10:02 AM

Suggestions like these are useful to see no matter how many times I have read them before. Repetition is important for me. I look forward to seeing your future tips as well.