A raise feels like progress, but what matters is what the extra money buys. One quick calculation tells you whether your pay actually went up.
The one-line check
Real raise ≈ nominal raise − inflation rate.
More precisely: (1 + raise) ÷ (1 + inflation) − 1.
- 3% raise, 3% inflation: real raise ≈ 0%. Same buying power as last year.
- 3% raise, 4% inflation: about −1%. You can buy slightly less than before.
- 5% raise, 3% inflation: about +1.9%.
Example in money
Salary $60,000, raise to $61,800 (+3%). With 4% inflation, last year's $60,000 would need to be $62,400 to buy the same basket. You are about $600 a year behind in buying power, before tax.
Your personal inflation rate may differ
The headline rate is an average. If rent, insurance or childcare make up a large share of your spending and those rose faster, your own inflation is higher. A rough way to check: compare your total essential spending this year with the same months last year.
What to do with the number
- Know your real raise before a pay review; "keeping pace with inflation" is a reasonable baseline ask.
- If you did get a real increase, decide where it goes before it disappears into everyday spending: for example half to savings or debt, half to lifestyle.
- Track salary history in a simple sheet with the inflation rate for each year. After a few years you will see whether your pay has really grown.
Free tools
- Pay raise calculator: https://smartbudgetsheets.surge.sh/calculators/pay-raise-calculator/?utm_source=mataroa
- Inflation calculator: https://smartbudgetsheets.surge.sh/calculators/inflation-calculator/?utm_source=mataroa
- Paycheck budget calculator: https://smartbudgetsheets.surge.sh/calculators/paycheck-budget-calculator/?utm_source=mataroa
- Debt Payoff Planner, up to 8 debts (Payhip): https://payhip.com/b/PtBLU?utm_source=mataroa
- 42 free budget templates, pay what you want ($0 is fine): https://smartbudgetsheet.gumroad.com/l/ngpkrb?utm_source=mataroa
General information, not financial advice. Figures are rounded examples.