| Parameter | Example value | Notes |
|---|---|---|
| Current salary | 45,000 | Current base pay per year |
| Target salary | 65,000 | Expected base pay after move |
| Time horizon | 8 years | Long enough to capture compounding |
| Transition months | 4 | Training plus job-change downtime |
| Direct costs | 3,500 | Tuition, exams, course fees |
| Recurring costs | 300/year | Renewals, memberships, subscriptions |
| Success probability | 75% | Conservative planning assumption |
| Discount rate | 10% | Time value + risk premium |
For each year t, we estimate baseline compensation (stay) and target compensation (move). We then compute after-tax incremental earnings and discount them back to today.
TargetComp(t) = SalaryTar·(1+gTar)^(t-1) + BonusTar + BenefitsTar + SideTar + EquityAnnual
ΔAfterTax(t) = (TargetComp(t) − BaselineComp(t)) · (1 − TaxRate)
PVΔ = Σ [ ΔAfterTax(t) / (1 + DiscountRate)^t ]
PVCosts = UpfrontPaid + OpportunityCost + Σ [ RecurringCost / (1+DiscountRate)^t ] + Σ [ LoanPayment(t) / (1+DiscountRate)^t ]
ExpectedNPV = (SuccessProbability · PVΔ) − PVCosts
ROI% = ExpectedNPV / PVCosts · 100
Opportunity cost is the portion of baseline earnings lost during transition months: OpportunityCost = (MonthsOut/12)·BaselineYear1·(1 − EarnPctDuring).
- Enter your baseline. Use your current salary, bonus, benefits, and realistic annual growth.
- Define the target. Put the compensation you expect after training or switching roles.
- Model the transition. Add training + job-search months and the income you can still earn during that period.
- Add costs honestly. Include fees, equipment, relocation, and recurring subscriptions.
- Set risk and time value. Choose a success probability and a discount rate that reflects uncertainty.
- Compare scenarios. Run conservative, expected, and optimistic cases. Export results as CSV or PDF for decision-making.
- Expected NPV is the value today after costs and risk. Positive is generally attractive.
- ROI compares expected gains to total cost (PV). It helps compare very different paths.
- Payback year indicates when you recover your investment in discounted terms.
- Break-even probability tells you how likely success must be to justify costs.
- IRR is a rate-of-return estimate; treat it as directional, not a guarantee.
Incremental Earnings Framework
This calculator compares a stay scenario with a change scenario. Baseline compensation includes salary, bonus, benefits, and side income. Target compensation adds equity and a signing bonus when applicable. The driver is the after‑tax difference each year. A common case is moving from 45,000 to 65,000, with bonuses and benefits adding 10–20%. Both paths can grow annually, so the tool models compounding rather than a single raise.
Discounting and Risk Controls
Future gains are worth less than today’s gains, so results are discounted to present value. A discount rate between 8% and 12% is common, but raise it for uncertain outcomes. Success probability converts projections into expected value; a 75% success chance scales incremental earnings. When probability is low, the break‑even metric shows how much certainty you need to justify the investment.
Cost Structure and Opportunity Loss
Costs are not limited to tuition. Direct fees, equipment, relocation, and subscriptions are treated as cash outflows. The calculator captures opportunity cost from transition months, such as a four‑month training period with 60% income coverage. That gap can exceed the course price, especially for mid‑career professionals. If you finance costs with a loan, the model reduces upfront cash paid today but adds discounted loan payments to total costs.
Payback, Break‑Even, and IRR
Payback year is estimated using discounted, probability‑weighted cashflows. It answers when cumulative value turns positive, not merely when nominal earnings exceed costs. Benefit‑cost ratio summarizes efficiency: values above 1.0 indicate expected benefits outweigh expected costs. IRR provides a rate‑of‑return estimate for the expected cashflow stream; use it to compare alternatives like certifications versus a degree. If IRR is unavailable, cashflows may not cross from negative to positive within the horizon.
Scenario Planning and Reporting
Professional planning benefits from multiple cases. Run a conservative case with lower target pay and probability, then an expected and optimistic case. Watch how payback changes when you reduce transition months, add a signing bonus, or adjust recurring costs. The year‑by‑year table explains where value is created and whether gains come early or late. Exporting CSV supports deeper analysis, while the PDF summary helps share assumptions with mentors and family.
FAQs
What does Expected NPV tell me?
Expected NPV is the present value of gains minus all costs, after discounting and applying your success probability. Positive values suggest the career move is financially attractive under your assumptions.
How should I pick a discount rate?
Use a rate that reflects your required return. Many people start around 8–12%. Increase it for volatile industries, uncertain job markets, or when your target compensation is less predictable.
Why include success probability?
Career outcomes are uncertain. Probability converts a best‑case projection into an expected value, helping you compare options fairly and avoid overcommitting to optimistic salary or timeline assumptions.
How are transition months handled?
Transition months reduce year‑one target earnings and create opportunity cost. You can model partial income during this period using the earned‑percent field, which reflects freelancing, part‑time work, or employer support.
Can I include equity and signing bonuses?
Yes. Add a one‑time signing bonus for year one and an annualized equity value for ongoing years. Keep estimates conservative and align them with vesting and performance conditions.
When should I use the loan fields?
Use loans when financing tuition or fees. The model lowers upfront cash paid today but adds discounted loan payments to costs, which can materially change payback timing and ROI.