I just heard that Google is giving ALL its employees a 10% raise for next year, yes all 22000 plus employees. WOW. Apparently it is to prevent employees from venturing into greener pastures nearby (read Facebook - who are dangling stock options as a way to lure good talent from other companies).
That got me thinking - what does a 10% raise really mean? Suppose Random Guy makes 4000 a month after taxes and has the following rough basic budget.
Fixed costs -
Mortgage/Rent - 1500
Utilities/Cable/phone bills etc - 450
Rx/Co-pays - 100
Car & Home insurance - 150
Total - $2200
Variable costs -
Groceries/Eat outs - 600
Car/Gas - 200
Travel & trips - 250
Miscellaneous - 200
Retirement/Savings - 550
Total - $1800
Now a 10% increase for him would be $400 more every month, but the fixed costs wont change(unless of course he randomly decides to change his living situation or goes out and buys a new car etc). So in effect he is making $400 more for all variable costs including saving and retirement contributions. He now has $2200 instead of $1800 for those - which makes it a 22% increase instead of the original 10%.
He can off course put all of it in the savings/retirement category and increase it to $950 from the original $550 - making it a cool 72% increase :)
Sometimes for me it makes more sense to break down the numbers and look at them in percentages to inspire me to be smart about my finances.