Choosing Not to Negotiate Your First Salary Could Cost You $65,173.56
New graduates are leaving the bubble of college behind and entering the workforce to start their careers. It’s an exciting and stressful time — and one that holds a lot of importance.
It’s that first job that can set the stage for the rest of their lives and provide much needed experience for their careers. It can also set the scale for how much they will earn over their lifetimes. Settling for a low salary or choosing not to negotiate can cost workers thousands of dollars over the course of their careers. Yet, it seems that the majority of new graduates aren’t negotiating and potentially leaving money on the table.
A recent survey by NerdWallet and Looksharp states that only 38% of new graduates negotiated with their employers after receiving an employment offer.
That means that more than half of new graduates aren’t negotiating and are just accepting the salary given to them.
The real kicker? Out of all of the employers that were surveyed, 76% of them said that employees who negotiated appeared confident for doing so. Not only that, but three-quarters of employers also said they had room to negotiate and increase salaries by 5-10%.
The lesson here, is that by negotiating you could appear confident and also increase your salary up to 10% right off the bat. Are you ready to earn more money?
The Cost of Not Negotiating
Are you leaving money on the table? Let’s say that you get offered an entry-level job at $30,000. That’s a very modest salary and depending on where you live, it could be a struggle (though I’ve lived in LA on that salary — tough, but doable).
If you negotiated a 5 to 10% increase, you could increase your salary by $1,500 to $3,000. While that might not seem like that much money, over time it adds up.
Using a $3,000 raise, you can:
- Shave off months of your student loan repayment
- Build a basic emergency fund
- Start a Roth IRA
- If you invest $3,000 and don’t touch it for 40 years, given an 8% return, you will have $65,173.56
This is what is at stake here if you don’t negotiate your salary.
Why Don’t We Negotiate?
I have a terrible confession to make. I only started negotiating once I became self-employed. I worked as an employee for nearly a decade and never once asked for more money. Why?
I was scared. I was happy to have a job. It was during the recession and I didn’t want to ruffle any feathers. I made excuses because I only worked at nonprofits and was convinced they didn’t have any extra money.
Now, I am kicking myself that I lost out on precious funds because I didn’t ask for more.
Here’s the thing. When an employer is offering you a job, they have already made the mental decision that you are the right candidate. The worst thing they could say is no. It is highly unlikely that they would renege on their job offer. So, really what do you have to lose?
Interestingly enough, I finally learned how to ask for what I want and negotiate now that I am self-employed. Being my own boss was the kick in the pants I needed to really step up and learn how to negotiate.
But if you are a new graduate, or even if you have already been working for a few years, it’s crucial that you negotiate and ask for more. You don’t know until you ask, and asking is powerful!
How to Negotiate
Now you know the cost of not negotiating and some of the reasons why people don’t. Most of it comes from fear. The only way to work through fear is to actually move through it. So, how do you negotiate?
Well, it’s a multi-step process and one you should start today!
The first step in preparing to negotiate is to do your research. Negotiating is a finely crafted skill that also has real numbers to back it up. You can’t just negotiate any rate you want for the job you have. It’s important to know what people in your geographic area and your field are making.
For example, a marketing manager in New York City will make a different salary than a marketing manager somewhere in the midwest. Cost of living does affect salary, so that is something to consider.
Start by looking at Payscale and Glassdoor to get an idea of salary ranges in your field as well as geographic area. This is helpful so that you don’t overshoot your salary and so that you don’t completely undersell yourself as well.
If you have specialized skills and services, then consider going for the top range salary. You want to value yourself and what you are worth! If you know a second language or have unique technical skills, then it’s possible you can command more.
After you have done your research, begin to practice, practice, practice! You’ll want to practice your negotiation skills with friends, family, in the mirror — and if you want to go an extra step, practice on camera (you don’t have to show anyone!).
Practicing can help you smooth out any rough edges in your approach. It can also help you test what works and what doesn’t work.
You’ll want to practice various scenarios:
- What will you do if they say yes?
- What will you do if they say no?
- How will you react if they want to negotiate and compromise?
During the practice sessions, it’s important to know what your minimum is. If they offer you a job at $30,000, but your minimum is $35,000, are you willing to walk away? You don’t want to settle for less or you will risk being resentful of a job that you don’t really want to be at.
When preparing to negotiate, know your minimum, middle ground and high point for your desired salary. This will help you be able to dictate a plan of action depending on your prospective employer’s response.
It’s key to practice and prepare for a variety of situations so that you are not caught off guard.
Cultivate Your Tools and Strategies
In addition to practicing and preparing, you’ll want to cultivate a box of tools and resources to help you along with negotiations.
Personally, I believe Ramit Sethi is one of the best in the field. His Briefcase Technique has helped land him and many of his students thousands of dollars in raises.
The Briefcase Technique can help set you apart from other candidates and showcase your talents. Not only that, it can truly show why you are the best candidate as it shows that you are a problem solver.
When your employer is about to offer you a job, open your briefcase and take out a proposal of all your suggestions of how to improve the company. Doing this shows that you have studied up and done your research on the company and that you are forward-thinking and ready to solve problems.
Job candidates can often talk too much about themselves, but what employers really want is someone that can solve problems and take things off their plates. How will you make your employer’s life easier? How will you add to the company culture and drive the company forward? Answering these questions and illustrating your ideas of how you will improve the company can help you command a higher salary.
In addition the Briefcase Technique, check out this comprehensive guide on salary negotiation.
Know Your Scripts
So, you have been offered a job and they offer you a starting salary. Whether you like the salary or not, it’s time to negotiate! If you are unhappy with the offer, this is a must, but it doesn’t hurt to ask for more even if you are comfortable with the salary.
You can start by saying “I am so excited about this opportunity and appreciate your offer. Given my skills and abilities, I was hoping for $35,000 for this position. Can we look at a starting salary of $35,000?”
It’s key to be polite, but also stand your ground. If they say yes, you can say, “Great, thanks so much for this opportunity. I look forward to growing with the company!”
If they say no, will you walk away or negotiate further? You can say, “Is there a number in between that we could settle on?”
While it may seem like your employer holds all the cards, remember they are choosing you and think you are the best fit. It doesn’t hurt to ask and negotiate. Remember, the majority of employers think you appear confident for doing so!
So whether you are a new graduate or have been in the workforce, it’s time to negotiate. If you don’t, you could be leaving thousands of dollars on the table, which ultimately can set you back financially.
Using the additional funds, you can pay down debt or use it to invest. Think about it this way. Can you afford to not negotiate?
Your Turn: What are your favorite negotiation strategies? How have they worked for you?
This post originally appeared on The College Investor. The College Investor helps millennials get out of student loan debt, earn more money, start investing and build real wealth.