Why My Raise Doesn't Feel Like a Raise

This Year's Salary Negotiation Results

My salary went up 7.2% this year. In absolute terms, that's about 4.3 million won. I thought it was a decent raise. But three months later, my bank balance looks about the same as last year.

I went through my actual spending to figure out why. (This is how I learned the hard way why you should track expenses.)

Actual Spending Comparison

Rent went up 50,000 won per month. That's 600,000 won annually.

Lunch averaged 11,000 won, now it's 13,000 won. At 22 working days per month, that's 44,000 won more monthly. 528,000 won per year.

I drink one coffee a day, and my regular cafe raised prices from 4,800 won to 5,500 won. That's 21,000 won more per month. 252,000 won per year.

Transportation, OTT subscriptions, telecom price increases add up to about 30,000 won monthly. 360,000 won per year.

Just these items total 1.74 million won annually. About 40% of my 4.3 million won raise is already eaten by fixed cost increases.

Why CPI and My Experience Don't Match

The Statistics Korea Consumer Price Index rose about 2.8% this year. My salary went up 7.2%, so I should be 4.4% ahead in real terms, right? On paper, sure.

But CPI includes things I don't buy. TV prices dropping and refrigerator prices falling don't mean anything to me. If you isolate the everyday expenses -- food, housing, transportation -- the increase is more like 5-6%.

And you can't forget taxes. When your salary goes up, you might enter a higher tax bracket. The marginal tax rate on my 4.3 million won increase is 24%, so the actual take-home bump is around 3.27 million won. Subtract the 1.74 million won in fixed cost increases, and the money I actually have to spend is about 1.53 million won more.

Divided by 12 months, that's about 127,000 won per month. No wonder it doesn't feel like a raise.

The Way I See It

News reports say "inflation is stabilizing," but that means the rate of price increases is slowing -- not that prices are going down. Cumulative price increases since 2022 are around 13-14%, and those aren't coming back down.

Even with 5% annual raises, you'd need cumulative increases of around 15% just to recover your purchasing power from three years ago. One 7% bump shouldn't make you feel proud -- you need to think long-term.

Playing Defense

Optimizing spending is easier and faster than negotiating a raise. I recently canceled a bunch of subscriptions and saved 42,000 won per month. An unused YouTube Premium family plan, an OTT service I barely watched, a productivity app subscription I'd forgotten about.

I also started bringing lunch twice a week and saved about 60,000 won monthly. But I gave that up after one month. Prepping lunch just took too much time.

Ultimately, there are limits to cutting spending -- increasing income is the real solution. But that means switching jobs or building side income, which takes energy. I'm writing this post in a state of not quite knowing where to start.