Making money: negotiating your salary for career earnings maximization
Updated: Mar 6
Negotiating your salary can be a daunting task. For many, they are just happy to get offered a job and are ready to take it on the spot. This is where many folks go wrong. Salary negotiations are an important part of long-term wealth potential and should be thought of as a key opportunity to maximize your earning potential over time.
Over the course of this article, we will give you some guidance on how to have salary negotiation conversations, why this shouldn't be a scary conversation, and how it can impact wealth over time (hint: the impact is HUGE!!).
Salary negotiations can have a dramatic impact on your wealth over time. You should be thoughtful about your approach to salary negotiations and open with the hiring manager and recruiter about your salary expectations. While this candid talk may eliminate you from certain employers or careers, it is important to set a precedence that you expect to get paid like top talent because you believe you are top talent and perform like top talent.
If you navigate the negotiations with candor, tact, and thoughtfulness then you can dramatically impact your career earning potential.
How salary negotiations can build wealth
The average American changes jobs 7 times over the course of their career, spanning from age 25-52. Let's play this out with some real-world numbers based on the data I found on Indeed.com
Let's say you get your first job at age 25 (a bit late for a typical college grad, but again, we are working with limited data) and you are offered $45,000/year. That's a good salary and if you ask for $50,000, as part of your salary negotiation, and finally land on $47,000/year you are on your way to a much larger pool of wealth!
So let's play this out over the course of your career, ages 25-65 and we will make a few assumptions along the way. Assumption 1, you will get a 3% raise every year. Assumption 2, you will get a 10% raise with every job change. Assumption 3, 10% of the extra money you earn will be invested in a 401k and that will make 6% a year.
With all those assumptions being true here are the differences you will see over the course of a 40-year career.
$250,000 in additional salary earned
$75,000 in additional 401k savings
$110,000 in additional 401k savings if you are saving 15%
I mean, can you even believe that? Asking for approximately 5%-10% more at each stop in your career makes a huge difference in the end.
How to position your initial ask so you don't have to negotiate
If you are looking for a new role and don't want to end up having a salary negotiation conversation you can always position your initial salary to ask above where you are comfortable landing.
Many recruiters or hiring managers will ask you what your current salary is. The way you answer this question can have ramifications upon the salary negotiation process that may follow if you are offered a job. If you are looking to get paid in a new job, then make certain the hiring manager knows what your salary expectation is vs telling them what your current salary is. Most are inclined to answer exactly where your present salary is. Answering like this may limit your salary potential within the new role and within your offer, should you get one.
Answering this question with the salary you expect to make will position you to get the salary you are looking for. It may also eliminate you from contention for the role, but do you really want a job that can't pay you what you believe you are worth?
So, my advice, no matter how they phrase their question about your present salary, answer based upon your salary expectations within the job you are applying for and you could end up avoiding salary negotiations altogether.
How to negotiate your salary
The salary negotiation tips below are a guide and not a "must" when it comes to salary negotiations. You should think of a salary negotiation as a critical part of the job search and your career path. Unless you aren't interested in maximizing your earnings, which some people aren't, then just ignore this entire article and focus your attention on something that matters to you! No judgment here, as I know, people are motivated by all types of different things.
Prepare and gain knowledge
Know what sets you apart
Compare the total package
Ask about a salary range
Do not use fear tactics
A no today isn't a no tomorrow (or 6 months from now)
Stay positive and open to anything
Find a manager that is aligned with your worth
Prepare and gain knowledge
Knowing what others make for similar roles is critical to ensuring you are getting paid what you are worth. Sites like Payscale.com and Salary.com are good resources to help you get a sense of what you are worth.
In addition, it never hurts to ask someone else in the industry what they are making. In the past, this topic has been taboo to talk about, but there is no law against it. Today, more and more folks are comfortable talking about what they are getting paid. Having that knowledge can help you get a little bit more as you negotiate your new salary.
Know what sets you apart
If you have ever talked to a recruiter they will use the term "unicorn" when they find someone with just the right set of skills for a particular job. The reason they use this term is that unicorns are rare (hint: they don't exist) so when they find one typically they will make a strong offer.
Why do I bring up unicorns? Because you need to highlight skills that make you look and sound like a unicorn. Setting yourself apart during the hiring process and showing that you are the ONLY person they should hire helps your case when asking for higher initial pay.
Compare the total package
Many of us get hung up on the pay and measure that against where we think we should be. That falls short of a full evaluation of the role. It is critical to think about healthcare costs, dental and vision, the 401k match or lack there or, vacation, holidays, work from home, MATERNITY LEAVE and PATERNITY LEAVE for that matter, and much more.
If you are struggling to compare your current job vs a current offer, or are comparing two or more offers just think about what matters to you most. If you are someone who really values saving in your 401k, then a company that has an amazing 401k match might be more your style. If you only care about the salary and expect that everything else will fall in to place, then focus on that. And if you just want a lot of time off, or a ton of freedom about where you work, then you will value vacation and remote work much more than other things.
In the end, it is up to you to determine what matters most to you, but make sure you are comparing the total compensation AND benefits package to find the most value out of a job.
Ask about a salary range
Many employers won't share this information. It's no big deal if they won't and I would suggest your respond by providing a range you would prefer to be in. Ultimately, the more knowledge you can gain about their ability to pay you what you want the better off you will be.
As an alternative, just provide them with your range and ask if that is aligned with the range available in the role. If so, you know there is probably some room to increase your salary vs their initial offer.
Do not use fear tactics
Negotiating for a better starting salary isn't a war. The person you are negotiating with is most likely the person you will be reporting to in the future. You want to get that partnership off to a great start from the beginning.
Ensuring you and your future manager are aligned will be critical to your happiness. As many of you know, the person you report to is the main component of employee happiness. Threats and fear tactics will either get an offer revoked or leave a bad taste in your future manager's mouth which won't be good for any pay raises or future negotiations.
A no today isn't a no tomorrow (or 6 months from now)
There might be circumstances that prevent you from getting the salary you want today. You might be entering at a Jr level and are maxing out the pay grade. That pay grade might change, you might move up to a Sr level by proving you are worth it, or some other circumstance that may limit an employer's ability to pay you more.
If you want a higher salary, be open about it and don't let the conversation die after you are hired. In 3 to 6 months, remind your manager about the salary you initially asked for. If you are performing above expectations they may be able to get you what you asked for. The critical piece in this is performing above expectations. You have to be doing that to warrant a pay increase. Another critical piece would be to identify what expectations are in advance so you can compare against them in 3 to 6 months.
Stay positive and open to anything
In some instances, your future employer may not be able to provide you with a bump in salary. They might be able to give you additional vacation days, or more flexibility about work from home. If they are offering stock options, they may be able to bump those up, or some other benefit that I've never thought of.
As I mentioned above, salary isn't the only thing you should consider when being offered a new job and if they can't move on the salary you should ask if they can move of some of the other parts of the compensation and benefits package they are offering.
Find a manager that is aligned with your worth
By now many of us have heard the old adage, employees quit a manager, not a company/role. That is as true as ever. Therefore, you should ensure, during the hiring process, that you find a manager that is aligned with the value you place on yourself and your skills. If you are in the middle of salary negotiations and the hiring manager doesn't believe you are worth what you are asking then maybe they aren't the right person to work for.
How to Negotiate Salary After Offer Letter
When negotiating salary after receiving an offer letter, there are a few key steps to follow:
1. Research the industry and company standards
It's important to do your research and understand the industry and company standards for salary. Websites like Glassdoor and PayScale can give you an idea of the average salary range for your position and location.
2. Consider your experience and qualifications
Think about your experience, qualifications, and skills. Have you recently completed additional training or earned a certification? Have you worked in a similar role before? Make sure to take these factors into account when negotiating salary.
3. Determine your ideal salary range
After doing your research and considering your experience and qualifications, determine your ideal salary range. This should be a realistic range that reflects the industry and company standards as well as your own worth.
4. Present your case
When discussing salary, be confident and clear in your communication. Present your case by highlighting your experience, qualifications, and skills, and explain why you believe you deserve a higher salary.
5. Be willing to compromise
Negotiating salary is a two-way street. Be open to compromise and be willing to listen to the employer's perspective. Remember, the goal is to reach a mutually beneficial agreement.
How to Negotiate Salary in an Interview
Negotiating salary during an interview can be tricky, but with proper preparation, it can be a successful conversation. Here's how:
1. Prepare your case beforehand
Just like when negotiating salary after receiving an offer letter, it's important to do your research and determine your ideal salary range. Practice your talking points beforehand so you feel confident and prepared.
2. Wait for the right time
When negotiating salary during an interview, wait for the employer to bring up salary. Avoid bringing it up yourself too early in the conversation.
3. Stay positive and professional
Throughout the negotiation, remain positive and professional. Avoid using negative language or being confrontational.
4. Emphasize your value
When discussing salary, emphasize the value you can bring to the company. Highlight your experience and qualifications, and explain why you believe you deserve a higher salary.