We so often hear that we need to save money and be frugal, but have you ever thought about how big an impact making more money would have on your finances? Today’s topic is salary negotiation, and I recently sat down with financial advisor and Certified Financial Planner Liz Windisch of Aspen Wealth Management, Inc., to learn more.
For context, you should know that in 2019, women still earn 79 cents for every dollar earned by men. (For more context and to learn about how race factors into the pay gap, see this year’s PayScale.com report.) This is especially important because, as Ms. Windisch points out, bonuses and cost-of-living increases are based on the initial salary, so starting at a lower rate means earning significantly less over the longer term, as well, as these figures compound. For example, she says, if you save 10% in a 401(k) over your 35-year career, the difference between a starting salary of $50,000 and $58,000 adds up to over $200,000 (assuming only 3% cost of living adjustments and a 8% rate of return). That’s just retirement savings and not all of the extra income you’ve brought home – think about how that adds up over time!
So what can you do to even things out? Well, you can start by getting more comfortable with salary negotiation. The idea is scary and uncomfortable for a lot of us, but it doesn’t have to be. The first thing to know is when to negotiate. This process doesn’t start until you have an offer—that is, a firm and real offer, with numbers attached. To be clear, this is not a “When would you be available to start” sort of comment, but a “We’d like to make you an offer of $75,00 a year, starting on November 8th.” Ideally, the offer will be in writing, but even if it’s not at this stage, make sure you get it in writing before you formally accept. Once you’ve gotten the offer, we can get down to brass tacks.
Now, before you enter the negotiation, you’ll need to know a few key things, like what is a normal salary for the title and where you live. Start by doing some research on Salary.com, PayScale.com, and GlassDoor. Look up both the title of the position you’re seeking and titles closely related to it. The first 2 sites will ask for a lot of information, so fill out as much as you can, since this will give them a greater ability to give you a range. Let’s say that your Salary.com info looks like this:
In the negotiation, you will start at that median point, $55,725. You can round numbers for ease, so you’ll say something like, “It looks like a typical salary for this position, with my education and experience, is between $56,000 and 64,000 annually. Is there room for negotiation?” If you have any special or unusual skills, be sure to mention those as well! You can also ask how they came up with a number, especially if it seems low. Remember, this isn’t about you as an individual, but about the value of the work you do, so don’t bring personal issues into it. It’s not unusual for an employer to ask why you deserve the salary you’ve requested, and even if they don’t, you will want evidence for it so you can make your argument, so prepare that info in advance. If you’re new to the field, be ready to talk about our education and tech skills; if you’re experienced, have examples of your success ready to go. There will likely be some back-and-forth in this conversation, so be ready for that. Don’t be inflexible, but do be ready to walk away if they can’t meet your needs. Your work has value! Don’t sell it short.
Finally, be aware that benefits can have a huge offsetting value, and can also sometimes be negotiated. For instance, you might be willing to take a smaller salary if you can get more vacation time, a childcare reimbursement, a gym membership, or the ability to work from home a couple days a week. Know your own values before you enter the conversation, and know what you’re not willing to accept. Take good notes so you remember what you’ve agreed on. Be gracious and confident (even if the confidence is a great big fake on your part).
You may also ask for time to consider an offer, but be reasonable. Say something like, “I’m very interested but need time to decide. May I get back to you tomorrow?”
Once you’ve reached a mutually satisfying agreement, be sure to thank the folks you’ve been talking to, and then request the agreement in writing. I cannot stress this enough. You must get it in writing so that everything is clear to you and your new employer. Read the info they send you carefully, and make sure that what you’ve said is in the formal agreement. Don’t sign it until you’re satisfied. Then, smile, sign on that dotted line, and take some time to celebrate your success because you just rocked that negotiation!
Disclaimer: The investment opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.