This guest post comes from Kimberly Palmer, author of Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back, which hits bookstores today. She's also the Alpha Consumer blogger at USNews.com.
Every time I've ever gotten close to a job offer, my Dad sits me down for a little practice negotiation session. He acts like my potential employer, and I act like myself. The conversation usually goes something like this:
Me: “Thanks so much, I am so excited to work here. But I was hoping to earn closer to $50,000.”
Dad: “Oh, I see. Well, we are prepared to raise our offer to $30,000.”
Me: “Um, okay, thanks. I accept.”
As you can see, I find it awkward to negotiate over money — something I'm embarrassed to admit, especially considering that I write about money for a living. But I know I'm not the only one; in fact, women in particular find it difficult to ask for more money. That's why, according to Linda Babcock and Sara Laschever, authors of Ask for It, men are four times more likely than women to negotiate for their first salary.
That awkwardness comes with a steep price: Babcock and Laschever also report that failing to ask for more money at the beginning stages of your career can cost as much as half a million dollars over the course of your lifetime.
Back to my Dad and our practice sessions. Our conversation might sound a bit silly, but those practice sessions have earned me at least $21,000 over the last six years. Here's how I get that number: At my very first job interview after graduate school, I was offered a salary of $34,000. But because I practiced negotiating with my Dad, I asked for $40,000. Eventually, we agreed on $37,000.
A difference of $3,000 might not sound like a lot, but consider that the salary increase not only continues year after year, but all future salary increases are based on that initial number. Say I average a five percent salary increase each year. Then that $4,000 quickly turns into $21,000 after six years. After 30 years, it becomes over $200,000! The difference becomes magnified further if you negotiate a higher salary each time you change jobs.
In addition to practicing in advance of your job offer (and it doesn't even have to be with a real person — even your cat will do), make sure you have an overall game plan. Know ahead of time how much money you plan to ask for. If the offer comes in lower than expected, don't back down. If it comes in higher, consider asking for even more than you had planned on.
Don't be afraid to keep your mouth closed after putting a higher number out there, either. Silence gives the other person a chance to up their offer. As my Dad always says, “Whoever speaks first, loses.”
Doing research ahead of time will also put you in a stronger position. If you can, ask current employees at your prospective employer what the salary range is. If your prospective employer asks you about the size of your current salary, do what you can to delay answering. Otherwise, you risk low-balling your offer because of a low current salary.
No matter how the conversation goes, close the deal with an enthusiastic smile. You might not get all the money you'd hoped for, but this person will be your future boss. Make sure you start off the relationship on a good foot. In some ways, that's more important than the size of your paycheck.
J.D.'s note: This post is so important. Please please please go back and re-read this. There are few things you can do that will boost your bottom line as much as learning to negotiate your salary.