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Cost of living adjustment

Excel formula: Cost of living adjustment
Generic formula 
=base+(base*cola)
Summary 

To calculate a cost of living (COLA) adjustment in Excel, you can use a simple formula that multiplies the base times the adjustment percentage, then adds the result to the base. In the example shown, the formula in C6, copied down, is:

=C5+(C5*cola)

where cola is the named range F6, and contains the adjustment as a percentage.

Explanation 

The goal in this example to calculate a cost of living (COLA) adjustment for each of the eleven years shown, starting on the second year. The actual adjustment percentage is entered in cell F6, which is the named range cola. Each year, the adjustment should be applied to the previous base amount in column C, starting with the base amount in cell C5.

The formula in cell C6, copied down is:

=C5+(C5*cola)

With 30,000 in C5 as shown, the formula is solved like this:

=C5+(C5*cola)
=30000+(30000*0.03)
=30000+900
=30900

As the formula is copied down the table, the relative reference C5 changes at each row, while the named range cola (F6) behaves like an absolute reference and does not change. The result on each new row is the previous year's base plus the adjustment.

Total adjustments

To calculate to the total of all adjustments, the formula in F7 is:

=SUM(C5:C15-C5)

This is an array formula, and must be entered with control+shift+enter, except in Excel 365. The result is the total of all adjustments made since year 1.

Alternative layout

The screen below shows an alternative layout that breaks out the adjustment amount separately, and allows a different rate of adjustment for each year.

COLA calculation alternative layout

The formula in N5, copied down, calculates the adjustment:

=M5*L5

The formula in M6, copied down, calculates a new base for year:

=M5+N5
Author 
Dave Bruns

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