📖 Overview
Use this upgraded calculator to measure whether a raise increases real purchasing power.
🧪 Example Scenarios
Use these default and higher-pressure example inputs to explore how sensitive this calculator is before using your real numbers.
| Input | Base Case | Higher Pressure Case |
|---|---|---|
| Old Salary ($) | 85,000 | 97,750 |
| New Salary ($) | 95,000 | 109,250 |
| Annual Inflation Rate (%) | 3 | 3.6 |
| Years | 1 | 1.15 |
⚙️ How It Works
This compares nominal pay increase with inflation-adjusted purchasing power over the selected period.
The Formula
Real Value = Nominal Value ÷ (1 + Inflation Rate)ⁿ | Real Change % = (Real New ÷ Real Old − 1) × 100
| Nominal Value | The stated dollar amount before adjusting for inflation |
| Inflation Rate | Annual inflation rate as a decimal |
| Real Change | Inflation-adjusted change in purchasing power |
💡When inflation runs at 4%, a 3% salary increase is actually a 1% real pay cut. Always evaluate raises in real (inflation-adjusted) terms, not just nominal percentages.
Quick Reference
| Nominal Raise | 2% inflation | 4% inflation | 6% inflation | 8% inflation |
|---|---|---|---|---|
| 3% | +1.0% real | −1.0% real | −2.8% real | −4.6% real |
| 5% | +2.9% real | +1.0% real | −0.9% real | −2.8% real |
| 8% | +5.9% real | +3.8% real | +1.9% real | +0.0% real |
| 10% | + 7.8% real | +5.8% real | +3.8% real | +1.9% real |
When To Use This
- Use this tool when you need a fast decision during active planning or execution.
- Use this before committing money, time, or tradeoffs that are hard to reverse.
- Use this to compare options using the same assumptions across scenarios.
Edge Cases To Watch
- Results can be misleading if key inputs are missing, stale, or unrealistic.
- Very small or very large values may amplify rounding effects and interpretation risk.
- If assumptions change mid-decision, recalculate before acting.
Practical Tips
💡 Use current inflation expectations for decision quality.
💡 Check both nominal and real outcomes before accepting offers.
💡 Run a best-case, base-case, and worst-case scenario before deciding.
💡 Use recent real values, not ideal assumptions, for better accuracy.
Frequently Asked Questions
❓ Why can a raise still be a real pay cut?
If inflation outpaces salary growth, purchasing power falls.
❓ Should I use one-year or multi-year inflation?
Match horizon to how long the compensation change is expected to last.