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If you're feeling squeezed trying to afford life's necessities, you're not alone. As inflation soars, wages struggle to keep up. The result: higher-priced necessities such as food, housing, transportation, and utilities — and less income to afford it all.

In recent months, inflation has accelerated as rising energy costs tied to the Iran conflict pressure the U.S. economy.

So what do the numbers say — have wages managed to keep up with inflation? And regardless of the data, how can you stretch your dollars further when your cost of living increases?

Are wages keeping up with inflation?

Until recently, wages were keeping pace with inflation. In the 12 months from March 2025 to March 2026, for example, wages actually outpaced inflation.

However, things have shifted over the past couple of months. In May, average hourly earnings rose 3.4% year over year — but consumer prices rose 4.2%, marking the second straight month that wage growth fell behind inflation.

Recent inflation trends

The Federal Reserve aims to keep inflation at a rate of 2%. But post-pandemic, supply chain disruptions and changing demand, among other factors, led to a rapid rise in inflation. One inflation measure — the Consumer Price Index (CPI) — rose to more than 9% over 12 months ending in June 2022.

Inflation has slowed since, though it's still elevated well above the Fed's target. The current CPI as of May rose 4.2% over the previous 12 months. In other words, prices haven't dropped. They just haven't been rising as fast.

Recent wage growth trends

On the other side of the equation is wage growth.

The gap between wages and inflation — which was previously as big as 4.8 percentage points in 2022 — had recently been trending in the right direction for earners. In fact, earlier in 2026, workers were seeing modest gains after accounting for inflation.

That said, rising consumer prices have largely erased those gains in recent months. And when prices rise faster than wages, workers experience negative real wage growth, meaning their purchasing power declines even if they're earning more money on paper.

Here's a closer look at how wages have compared to inflation over the years:

What to do when your pay isn't keeping up with the cost of living

When your bills seem to grow faster than your cost-of-living wage increases, frustration can set in. Unfortunately, the price of most things is beyond your control. But that doesn't mean you're powerless in stretching your budget.

Read more: This map compares the cost of living in every state

If your pay isn't keeping up with your cost of living, implement some of the following strategies to get a little more bang for your buck:

Make your savings work harder

If you have money sitting in a traditional savings account, inflation is quietly eating away at your balance. However, you can fight inflation by putting that money in a high-yield savings account (HYSA).

With the best HYSAs currently earning up to 4% APY, the difference in interest earnings can be staggering. For example, with $10,000 in the bank, you're looking at a difference of nearly $400 in a single year.

Read more: How much can I earn in a year with $10,000 in a savings account?

In addition to HYSAs, you can consider other places for your cash to hedge against inflation:

• Inflation-indexed bonds: In the U.S., inflation-indexed bonds are called Treasury Inflation-Protected Securities, or TIPS. The principal of a TIPS grows with inflation, meaning you receive an inflation-adjusted price when your bond matures.

• I bonds: Available through the U.S. Department of the Treasury, Series I bonds earn both a fixed rate of interest and a variable rate. The fixed rate stays the same for the life of the bond, while the variable rate is tied to inflation and changes twice a year to coincide with changes to the Consumer Price Index for all Urban Consumers (CPI-U).

• Money market accounts: A money market account blends features of a savings and checking account, but they often pay out higher rates than traditional savings accounts. Keep in mind you may need a higher initial deposit to open one.

• CDs: A certificate of deposit (CD) is a time deposit that earns fixed interest on your money for a set period. If you lock in a high interest rate and rates subsequently drop, you'll benefit from higher earnings for the duration of your CD. The catch? You can't touch your balance (without penalty) until the CD matures.

Read more: How inflation affects savings: Here's the interest rate you need to beat

Focus on paying down debt

Borrowing money isn't free, and interest charges can eat away at your savings and cut into any pay increases you earn.

If you have high-interest debt such as credit cards or personal loans, make paying it off a priority. There are a number of strategies you can use, from the debt snowball or avalanche method to debt consolidation or refinancing. The best way to get rid of your debt will depend on a few factors, including the amount, interest rate, and your monthly cash flow.

Read more: Need a plan to pay off debt? Try this 7-step budget guide.

Consider negotiating a raise

Money out is just one side of the equation. To fight inflation, you can also try to increase the amount of money coming in via your paycheck. Salary negotiation is just one way to do so.

If you think you're underearning at your current job, don't hesitate to try negotiating a raise. (Hint: If you didn't negotiate your salary when you got hired, you're likely being underpaid.)

Start by doing some research about your position's average salary. If you can find out what colleagues in similar positions are earning, that'll also help. Then work on compiling your achievements — the more specific, the better — and practicing your pitch.

Start a side hustle

If you have the extra time and energy, consider starting a side hustle to bring in extra cash. Side gigs can be related to your day job, but they don't have to be. In fact, if you have a hobby or passion that you enjoy doing and can monetize, your side hustle may not feel much like work at all.

Common side hustles include freelance writing or editing, consulting, tutoring, and social media management. If you're not set on working from home, you could also consider things like driving for a rideshare company, dog walking, or shopping for and delivering groceries.

Consider a career change

Sometimes, despite your best efforts, a salary raise isn't in the cards. If this seems to be an industry-wide phenomenon, you might think about making a career change. (Additionally, if you're bored at your job and there's limited upward mobility, that might be reason enough to change careers.)

If possible, focusing your career search on fast-growing industries might buy you more earning power. Currently, some of those fast-growing industries include renewable energy, healthcare, and the information sector.

Relocate

If you're in a high-cost-of-living area, your entire paycheck may get eaten up by rent, groceries, and the other monthly necessities. And while there are some things you can't control when it comes to affording essential expenses, you usually have some say over where you live.

If you have the flexibility, moving to a more affordable area could significantly reduce your monthly bills. Whether that means going remote with your current job, looking for new opportunities in a new city, or starting a business of your own, relocating could save you thousands (or more) per year. Just be sure to consider moving costs when calculating these potential savings.

Read more: How to save money on groceries: 13 ways to stretch your food budget