Think about all the ways that money can make you feel:
- Guilty: Should I have really bought that latte this morning?
- Powerful: I'm in control of my life.
- Worried: Are we saving enough? Can we afford this?
- Confused: Should we pay off more debt or invest?
So many negative feelings on the list. It’s easy to see how these negative feelings can affect our physical health, psychological well-being, and especially our relationships.
Just think: What if money wasn't a problem? Could you take an extra vacation? Splurge on those new shoes guilt-free? Finally invest in a personal trainer? Buy a round of drinks for your friends?
There are a few unconventional truths about money that most experts won’t teach you. For example, when money is tight, our first instinct is to look at what we can cut. And while this helps a little, learning how to make more money can be game-changing.
There is a limit to how much you can cut, but no limit to how much you can earn.
Instead of small, continuous cutbacks that cause constant stress and guilt, I believe in nailing the Big Wins in our finances and our lives. For example, if you negotiate just one $5,000 raise, paying for your morning lattes for the entire year is just a drop in the bucket.
Negotiating your salary is a huge win and almost no one does it. You can set the process in motion today. I’ll show you how.
Here are 5 principles of negotiation you can apply today:
1. Know what you’re worth. (Most people are underpaid.)
If you’re a woman, you’re probably the most underpaid of all: Women are four times less likely to negotiate than men. And when they do negotiate, they ask for 30% less than men do, on average. It only takes a few minutes to find out what you’re actually worth. Use these 3 sites to get average salary ranges for your job title:
I guarantee that when you look up this number, you will be surprised. Watch what happens.
A couple of tips: Try different variations of your job title/industry. And use your performance level and years of experience to estimate where you fit on that range.
2. Know what you want.
Your annual salary is probably going to be your main concern. But don’t stop there. You’ll want to come up with at least 2 to 3 other “Asks” in addition to making more money. This way, you have something to fall back on if they’re inflexible. Incidentally, you might just get everything you ask for!
Here are a few things you can ask for besides salary:
- Extra vacation time
- Performance bonus
- Flexible schedule or the option to work from home part-time
- Equity/Stock options
3. Prime your boss for the discussion.
When you negotiate, your boss should already know it’s coming. If you simply blindside your boss, you’re putting him on the spot. Nobody likes being cornered, especially about money. Their natural reaction will be to become defensive. In psychological parlance, they’ll experience “reactance” — which means they’ll say no.
Here's a script you can use to prime your boss for an upcoming review:
How’s it going? I’m really looking forward to chatting with you at my upcoming review. I’ve been thinking a lot about the goals we set for me earlier this year (see below), and I have some ideas on how I can do even better in the next year.
I’d like to discuss these, as well as my level of compensation, when we meet next week. Just wanted to give you a heads up. Can you confirm our appointment at [time and date]?
4. Collect your accomplishments throughout the year.
Look back at what you’ve contributed to the company. Also, use your email archives to find compliments. Did your boss email you a “great job!” when you worked overtime on a project? Did your co-worker say, “That was an amazing catch” when you saved the company money?
You'll want these wins on hand for your negotiation.
5. Anticipate objections.
Part of your practice should be preparing for a wide variety of responses and objections. Common objections you should be able to address are:
- We just don’t have the budget for raises this year
- This is above our “standard annual raise.”
- In the interest of fairness, I can’t pay you more than your coworkers
These objections stump most negotiators, but I’ve put together responses to each of these. For the exact words to use in your negotiation, check out this 12-minute video I put together for you.
Ramit Sethi is the author of the New York Times bestseller, I Will Teach You To Be Rich. He writes about psychology, entrepreneurship, careers and personal finance for over 500,000 monthly readers on his website, Iwillteachyoutoberich.com.