People often ask: “Inflation is cooling—why does it still feel tight?”
One common reason is that your budget depends on the gap between income growth and price growth, not on inflation alone.
Nominal vs real (plain English)
- Nominal income: your paycheck in dollars.
- Real income: your paycheck after accounting for inflation (purchasing power).
A useful shortcut:
Real wage growth ≈ wage growth − inflation
If wages grow 3% but prices grow 4%, your “real” change is about −1%.
Why this matters for “runway”
US Kill Line is built around the idea of runway: how long you can keep paying your obligations if something goes wrong.
Runway is driven by two everyday numbers:
- Monthly surplus = income − fixed costs − essentials
- Liquid buffer = cash / easily accessible savings
When inflation stays above wage growth:
- essentials get more expensive,
- surplus shrinks,
- buffer rebuild slows,
- and it becomes easier to cross the line after a shock.
CPI is not “your CPI”
CPI is a broad average. Households feel different inflation depending on:
- rent vs mortgage (and whether you have a fixed rate),
- childcare and education,
- healthcare premiums and out-of-pocket costs,
- commuting/transportation needs.
So even if headline CPI drops, your personal cost basket may still rise quickly.
A simple habit (better than doomscrolling)
Once per month, write down:
- take-home income
- housing payment (rent/mortgage)
- insurance + utilities
- minimum debt payments
- average essentials (food, transport)
Then compare the total to last month. If your essentials are rising faster than income, you’ll see the squeeze early—before it becomes a crisis.
Links (primary)
- CPI (BLS): https://www.bls.gov/cpi/
- Wage series (FRED, AHE): https://fred.stlouisfed.org/series/CES0500000003
Disclaimer
This is educational content only and not financial, legal, medical, or investment advice.