You got a 20% raise over the last five years. So why doesn't it feel like it?
When most people get a raise, they assume they're getting ahead financially. Sometimes they are. But sometimes they're simply running faster to stay in the same place, and not realizing it.
That's because one of the most important measures of your financial health isn't how many dollars you make. It's what those dollars can actually buy.
That's called purchasing power. And if you don't understand it, you can end up with a bigger paycheck and a smaller life without ever knowing why.
What Is Purchasing Power?
Purchasing power is simply the amount of goods and services your money can buy.
If $100 buys ten grocery bags today but only eight grocery bags five years from now, your purchasing power has decreased. You still have $100. It just doesn't go as far.
More dollars doesn't always mean more power. That's the part most people miss.
Why Does It Feel Like Everything Costs More?
Almost everyone has said some version of this:
"I remember when eggs were cheaper." "I remember when houses were affordable." "I remember when filling up my gas tank didn't hurt."
It's easy to assume everything around us is simply becoming more expensive. But another question worth asking is this: is everything becoming more expensive, or is each dollar buying a little less than it used to?
That question changed the way I thought about money.
Salary Isn't the Whole Story
Imagine two people. Person A earns $60,000 a year. Five years later, they earn $75,000.
On paper, that's a 25% raise. Something to celebrate. But during that same period, housing, groceries, insurance, and healthcare all became more expensive too. If those extra dollars don't buy meaningfully more than the old ones did, Person A didn't actually get ahead. They just kept pace, or worse, fell slightly behind while their bank account made it look like progress.
That's the part that should stop you: a raise can hide a pay cut. If your income grows 5% a year but your purchasing power shrinks 6%, you're poorer than you were last year, even though every paycheck says otherwise.
Income matters. But purchasing power tells you what that income is actually worth.
Why This Matters
Understanding purchasing power helped me realize that earning more money and preserving wealth aren't always the same thing.
Many of us spend years focused on increasing our income. We negotiate raises, work overtime, change careers, start businesses. All of those things can be worthwhile. But very few of us stop to ask what is happening to the value of the money we're working so hard to earn.
That question is just as important as the raise itself. Maybe more important because a raise you negotiated feels like a win you can control. Purchasing power erodes quietly, in the background, whether you're paying attention or not.
The Question That Started Everything
Learning about purchasing power didn't give me all the answers. It simply made me curious.
Why does purchasing power change? What causes it? Can it be preserved? Has this always happened throughout history?
Those questions eventually led me to study money itself, not because I was looking for a particular conclusion, but because I wanted to understand one of the systems that shapes nearly every part of our lives.
Closing Thoughts
Here's the one thing worth taking away from all of this: the next time you get a raise, don't just ask what your new salary is. Ask what it can actually buy compared to what your old salary could buy a few years ago. That single comparison will tell you more about your financial progress than the number on your offer letter ever will.
Understanding money is a lifelong process. I'm still learning, and I don't expect to have all the answers. But that's one question I'd encourage you to start asking.
About the Author
Hi, I'm Jay, founder of Bit Babe.
A few years ago, I started asking bigger questions about money, and those questions changed the way I see the world. I'm not here to tell you what to think. I'm here to share what I'm learning and make these ideas feel more approachable, especially for women who were never taught how money really works.
When I'm not writing, you'll usually find me building Bit Babe, reading about money and economics, or spending time with my daughter.
Thanks for reading.
