Inflation has been a vicious beast in 2022, but next year is gonna be better, right?! The answer is clearly…maybe.
Here are Five Fast Facts on the effects of this year’s inflation in 2023:
- 📈 Mo’ Money! On the heels of the Great Resignation, bosses have been offering raises to attract and keep workers; this is expected to continue into 2023. Many are planning on raises of 4-7%, which sounds great…except that inflation is up over 8%. This means your Paycheck will be bigger, but will still feel short at the gas pump, grocery store, and everywhere else. It’s a win…kind of. Like kissing your cousin.
- 🔧 Bracket Adjustments - The feds adjusted the income tax brackets to try to ease the pain a bit, so next year’s tax brackets were expanded by about 7%. So, a couple making $89k next year will be taxed at the same rate as a couple making $84k this year. This is definitely good news!
- ‼️ Tax Changes - Unfortunately, payroll and health insurance taxes will all go up, too, meaning less cash in your Paycheck. Nooooooo!!!
- 🤔 Contribution Changes - Retirement accounts and health spending accounts will generally have higher contribution limits (meaning you can put more into them without getting taxed more), but that still results in smaller Paychecks. Another “cousin kissing moment”…
- ⏲️ How Long Will This Last? This is the key question! There’s no concrete answer, but a rule of thumb is 29 months from the first changes in monetary policy to the effects being felt. The USA’s central bean counters finally began addressing inflation in early 2021, so that means…it’ll be at least late 2023, if not longer. Looks like we’ll need to get comfy with that cousin. Ick.
🔥Bottom line: This is a mess! Our government has really jacked things up, and at this point there’s no easy way out of it. The best plan is to take care of your own finances by budgeting, planning for retirement, and getting smart with your money.
What are you doing to get your Paycheck ready for next year?
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