Entry 12 – Surprise 1

Before I explain my results, I must explain how the annual raise was determined by finding the average of the values, which were the distances of between different salaries for one year. I found my numbers in the following website. From this website I found that the average paleontologist starting salary is $59,000 and that in five years this value could raise to $67,000. Then, with ten year’s experience, the salary raises to $76,000 and that in fifthteen years this value is $84,000. Once your experience reaches at least 20 years you could achieve a salary of $98,000. To determine my annual raise I did the following calculations - ($67,000-$59,000)/5 years = $1600/year; ($76,000-$59,000)/10 years = $1700/year; ($84,000-$59,000)/15 years = roughly $1667/year; ($98,000-$59,000)/20 years = $1560. Following the calculations that got me these different yearly changes in salary I took their average: (1600+1700+1667+1560)/4 = 1631.75, which gives me my annual wage increase of $1,631.75.

One thing I am assuming with these calculations is that I am actually starting off with a salary of $59,000; in my previous research entry, I found that entry jobs for Paleontologists can pay anywhere between $40,000-$80,000 a year depending on the type of work you are doing. Also, I am assuming that I am going to be raised to these specific wages. In addition, I found two different rates from the Wells Fargo website savings accounts section, .03% and .05%, to use as a pessimistic and optimistic, respectively. With these rates I am assuming that they would stay the same for every year.

Now moving on to my actual life time earnings, with these calculations I am assuming that I will be working for only 40 years, will not be unemployed, and that I will be getting a salary raise of $1,631.75 every year.

To access the excel document please click here.

Pessimistic Future Value of Lifetime Earnings:

With my first part of the spreadsheet I am basically using the simple future value formula, PV*(i^N), to find my total earnings in 40 years. To try to get the most accurate results possible, I decided that it would be best if I calculated the future value of my base annual salary of $50,000 and my annual raise of $1,631.75 separately using the following excel equation: (A2*1.0003^C2)+(B2*1.0003^C2). The first part of the equation that starts with the cell A2 represents the future value of $50,000, while in the second part the cell called B2 is the future value of the annual raise. This equation then adds those two future values to get a total future value for that year, which is represented by cell C2 in the equation. The reason for making separate calculations as one could see on the spreadsheet is because the equation itself works for both values but since I want to calculate the future value of my lifetime earnings, I need to find a sum of all the values. The final total of these calculations came out to be $2,078,021.09, which represents the least amount of money I’ll have within 40 years.

Optimistic Future Value of Lifetime Earnings:

To find the optimistic future value of my lifetime earnings, I used the same equation and reasoning to find the pessimistic value. Except, for the optimistic value I used the interest rate of .05%, which translates the equation into: (A2*1.0005^C2)+(B2*1.0005^C2). And the cells H2, J2, and I2 took the places of the cells A2, C2, and B2 respectively. The number yielded then came out to be $2,086,577.27, which is the most amount of money I’ll make within 40 years according to the future value formula. Also, with both values yielded, I am accounting for inflation.

Pessimistic Future Value of Annuity:

The future value of annuity formula like the simple future value formula tells you how much money you would make within a certain amount of years and also accounts for inflation. To find my annuity’s, or cash flow’s, future value I used the following excel equation: O2*((((1+0.0003)^P2)-1)/0.0003). This equation was used to find my annual salary’s, my annuity’s, future value. Cell 02 is used to represent my annual income and P2 represents the amount of years I am accounting for. In addition to the value yielded by this equation, I used the equation: O5*((((1+0.0003)^P5)-1)/0.0003) to find out the future value of my annual raise, annuity, and I added both yielded values to determine my total pessimistic estimation of my annuity’s future value. The reasoning for separating my annual salary and annual raise would be to account for the fact that the future value of annuity equation assumes your present value is constant and so separating them makes sure that these two values aren’t assumed to be constant.

Optimistic Future Value of Annuity:

To find this value I used the same equation format as the pessimistic future value of annuity, except I replaced the interest rate with .05% and the cells 02 and P2 were replaced by 09 and P9 when I calculated the future value of my annual salary. Also, the equation yielding the future value of my annual raise had cells 05 and P5 changed to cells 012 and P12. The sum of both yields then gave the most amount of money I will make in 40 years.