Raise ROI Calculator
Shows the percentage return of an extra salary vs. inflation.
Quick Use Samples
Your Raise & Investment
Investment Projection
Investment Growth Over Time
💰 Ready to grow your money?
- 🔹 Raiz: Microinvest your spare change
- 🔹 Swyftx: Trade crypto with confidence
We may receive a commission from our partners if you sign up through these links. This helps us keep our tools free.
What is the ROI of a Raise?
The Return on Investment (ROI) of a pay rise is a concept that reframes the extra income not as something to spend, but as capital to invest. This calculator shows the powerful long-term financial impact of investing the proceeds of your raise, demonstrating how it can grow into a significant sum through compounding.
Behind the Formula
The calculator first determines the annual after-tax amount of your pay rise. It then treats this amount as a regular, annual investment into a portfolio with an assumed rate of return. Using a future value of an annuity formula, it calculates the total value of these invested raises over a specified number of years, showing both your total contributions and the investment growth.
Expert Insights
- The single most powerful decision you can make when you get a pay rise is to invest the entire after-tax amount. This avoids 'lifestyle inflation' and turns a small income boost into a massive long-term wealth generator.
- The assumed rate of return is critical. The difference between a 6% and an 8% annual return can lead to a difference of tens or even hundreds of thousands of dollars over a long investment horizon.
- This concept highlights the immense opportunity cost of spending your raise. A $5,000 raise spent on holidays is $5,000 gone; a $5,000 raise invested could be worth over $50,000 in 20 years.
Actionable Tips
- Automate it. The day you get your first increased paycheque, set up an automatic transfer for the extra amount to go directly into a separate investment account. You can't spend what you don't see.
- Use this calculator as a motivation tool before a salary negotiation. Quantifying the long-term ROI of a successful negotiation can give you the confidence to ask for what you're worth.
- Consider investing your raise in your superannuation through salary sacrifice. This provides an immediate tax benefit on top of the long-term investment growth, making it an even more powerful strategy.
Real-World Examples
Investing a graduate's first big raise
A graduate gets a $10,000 pay rise. By investing the after-tax amount of about $6,750 each year, it could grow to over $150,000 in 15 years with a 7% return.
The long-term impact of a small, consistent raise
Someone receives a modest 3% raise on an $80,000 salary. Investing this small after-tax amount of ~$1,620 each year for 30 years could still result in an extra $150,000 for their retirement.
A mid-career promotion
A manager gets a $20,000 promotion. Investing this raise could be worth over $450,000 in 20 years, potentially allowing them to retire several years earlier.
Glossary of Terms
Return on Investment (ROI)
A performance measure used to evaluate the efficiency of an investment. It is the gain from an investment relative to its cost.
Compounding
The process of earning returns on not just your original investment (your contributions) but also on the accumulated returns. It's what makes investments grow exponentially over time.
Lifestyle Inflation
The phenomenon where an individual's spending increases as their income rises. It is the biggest barrier to building wealth from a pay rise.