Saturday, February 22

3 Things That Don’t Matter When Negotiating Your Salary

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I am a huge advocate of increasing your income. It’s far more effective in building long-term wealth than trying to trim your budget. There is a limit to what you can pare down or axe from your budget, but there is no limit to your earning potential. It’s for this reason I will always encourage you to take control of their income by negotiating you salary.

Granted, most people don’t think that way. Most of us have imaginary income ceilings inside our own heads that centre around what constitutes as “average” for our age, experience, or occupation. We’re constantly comparing ourselves to our peers, or the general population, in order to see if we measure-up income wise. But the truth of the matter is what you earn is in your own hands. So when it comes to going to the table to negotiate your pay, don’t let the following 3 things influence your ask!

3 Things That Don’t Matter When Negotiating Your Salary

1. How much you need to live on

When it comes to making a salary request, many young people make the mistake of thinking of their pay in the context of what they need to live on. On websites like Reddit and Quora, I often see users making arbitrary calculations like, “My rent will be X, and my food will be Y, so I’m going to ask for X + Y + $3,000”. It might take some mental gymnastics to divorce yourself from this thought, because almost everyone thinks of the purpose of their job is to pay their bills but remember this:

Need is completely irrelevant.

You should be paid how much you are worth, not how much you “need”. Repeat the above over and over and over until it no longer sounds foreign. Your employer doesn’t care — and probably has no idea — what you “need” to live on. They may or may not have any concept of what life looks like on $30,000 or $50,000 or $100,000, but they also don’t have to because it DOESN’T MATTER. I only “need” about $20,000 to live on (if you can believe it!), but that is a fraction of my current pay. Never ask for what you need, ask for what you want.

2. What you made at your previous job

A lower-income position at your previous employer may have tricked you into believing you are only worth that wage, or a few thousand dollars over. Many of us fall into the trap of believing what we are paid is what we are worth. Just so you know, if you didn’t aggressively negotiate your old pay, you probably weren’t being paid what you were worth. You might have already heard that employees that switch companies every two years can earn more than twice the salary of employees that stay put. Why? Because moving to a new role at a new company gives you an all new opportunity to ask for more money. At your current job, they may expect to give you a raise that amounts to only 1-3% of your salary each year, but switching employers can translate to 10% to even 50% more right off the bat. If (or rather, when) you move companies, DO NOT use your previous salary as a benchmark, doing so will only hinder you. Your previous salary is what you were paid by a company that took you on when you were inexperienced — now all your experience at that company is your new card to play at the salary negotiation tables. Sell yourself high, don’t let your old job hold you back after you’ve left it!

3. What your colleagues are making

I know, this is a weird one to wrap your head around, because one of the biggest movements in personal finance is encouraging people to talk about how much they make. While I agree that transparency about income is good, it doesn’t mean your coworker’s pay should be used as a benchmark for your own. Whether your colleague is making $10,000 more or $10,000 less than you doesn’t impact — and therefore shouldn’t influence your perspective of — your own salary. It’s unlikely you and your coworkers are performing at exactly the same level with exactly the same credentials and exactly the same experience. People work at different capacities, even in the same roles, and salaries can and should reflect that. If your coworker is making significantly more than you, try to determine if there is a real reason for it: do they have more education? Do they work longer hours? Do they have a specialized skill that lets them take on more projects? Many people make the assumption that they deserve to be paid the same as everyone else in the same position, when really, very small distinctions in seniority or credentials can make thousands of dollars of difference in pay. Don’t worry about what anyone else is earning, worry about you.

Navigating salary negotiations is tricky (but there’s a post for that!). However, it all starts with the perception of yourself and what you believe you deserve to be paid. Don’t settle for less, but don’t overreach either. Like any career endeavour, its a balancing act and it can take time to get to where you want to be.

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About Author

Student debt killer, super saver, and stock market addict. BSc. in Chemistry from the University of Alberta, MBA in Finance from the University of Calgary. CEO x 2 and MOM x 1. Currently residing in Calgary, Alberta, Canada, but hooked on travelling.

8 Comments

  1. I would also add the following that don’t/shouldn’t matter:

    – your age
    – your gender

    • 100% agree… but I am so sick of having the gender argument about pay. I hope no women reading this blog think gender factors into pay, otherwise I would like to chat with them personally rather than write a post about it;)

  2. Such good points! But what do you do when you are asked what your current salary is? You are anchoring the discussion weather you want to or not.

    • That is a GREAT question!

      … and it’s actually one you don’t have to answer! Dodging this question is as comfortable as not making the first ask, but you can and should be vague if it’s significantly lower. You can even say outright, “My previous company was not able to pay me a competitive salary because of X (where X is market conditions, staffing issues, whatever), and it is one of the main reasons I am seeking a new job”.

      I would avoid disclosing numbers, but if you can’t, give them a range or a vague idea that hints at what you’ll be asking from them. For example say, “It was less than $50,000, but I know my skill set is worth much more than that”.

  3. I agree with giving them a range. Last year when I interviewed for a job the interviewer asked what my current salary is. I gave them a range and also told them that my employer takes into consideration that they pay for us to get qualified when calculating the salary.

  4. I loved this post so much that it totally inspired me in my most recent job hunt. I totally lived under the idea of an income ceiling until, I swear, a few months ago when I really understood my true worth. From September 2012 to September 2015 I’ve completely doubled my income with more to come. Wish I got the memo a bit earlier but I get it now and I’m a living example of taking all this to heart.