For the last few weeks Bill was open to work. In September he signs: a permanent contract, 1,740 net a month from 1 October, after two years and three months on 1,400. On its own that is a raise of 340, and it is the number anyone would lead with.
The job is in another city. The flat that comes with it is furnished, which spares him the cost of the move, and it costs 750 a month in rent, utilities excluded. His current rent, split out from the bills since August, is 510.
Incremental analysis compares two options on the items that differ between them and ignores everything that stays the same. Costs already incurred are excluded, and so is every line that would be identical either way: they cannot influence a choice they do not vary with. What survives the filter is the decision.
Applied here the filter is short. Salary rises by 340. Rent rises by 240, comparing rent to rent, since the 510 was separated from the utilities in August and the 750 excludes them too. The increment is 100 a month. Not 340, which is what the employer pays, and not 240, which is what the landlord takes.
A comparison is only as good as its scope, and this one has a declared limit. Bill holds his other costs constant because he cannot yet measure them: utilities in a city he has not lived in, transport on a route he has not taken, the friction of a routine he has not built. The 100 is an estimate resting on an assumption, and the assumption is stated rather than hidden inside the result.
One item never reaches the table. Incremental analysis prices cash flows, not the reliability of them. A permanent contract does not add a euro to the 100, and it changes the risk attached to every euro that follows it.
Signing the employment contract produces no entry. Nothing is earned and nothing is owed until the work starts on 1 October, so the ledger records an event and not a transaction. The decision is taken in September and the accounts feel it in October.
The lease is different. On the same day Bill transfers the deposit on the new flat, three months of rent, 2,250. That is a transaction and it is recorded: cash falls from 4,712 to 2,462, security deposits rise from 1,200 to 3,450. A deposit is money held by someone else and recoverable at the end of the contract, so it moves from one asset to another. The total does not change. Net assets stay at 7,013.50.
The balance sheet is unchanged and the position is not. Bill has just over half the liquidity he had that morning, in the month he has to move, and the old deposit of 1,200 does not come back until 1 October. The two readings disagree because they measure different things: net worth reads the stock, liquidity reads the timing.
The lease that produced the deposit, the 48 months it runs for, and the first month measured in the new configuration each get their own entry.
The tip
When an offer arrives, do not compare the two salaries. Compare the two lives, line by line, and keep only the lines that move. The raise is what the employer pays. The increment is what you keep.
Incremental analysis, September 2026: permanent contract signed, 1,740 net a month from 1 October against 1,400 today, an increase of 340. Rent rises from 510 to 750, rent only, utilities excluded in both, an increase of 240. Incremental monthly result 100, holding all other costs constant until they can be measured. Signing the employment contract creates no entry. The deposit on the new flat does: 2,250 paid on 22 September, cash 4,712 to 2,462, security deposits 1,200 to 3,450, net assets unchanged at 7,013.50.
Bill is 26. Every episode, we read his personal ledger through accounting eyes. / FY 2026 ledger