My worst post-grad money mistake was not an obvious one. I didn’t furnish a huge apartment with rent-to-own stuff. I didn’t neglect retirement contributions. I didn’t even run up a ton of credit card debt! Nonetheless, my mistake has cost me money and might have lasting impacts on my earning potential for the rest of my life.
What was my mistake?
I didn’t negotiate my first salary.
I had been interviewing for months, and was about to run out of money. I was desperate for a “real” job — and I really, really wanted this one. I had figured out a salary amount that would allow me to stay in New York City, covering my basic bills but without much wiggle room. I did manage to name a range with that number as the low end, but I didn’t shoot high enough, and I accepted the first offer the company made me. (When I left the job two years later, they paid my replacement — who had less experience — $9,000 more than they were paying me, so I really screwed myself!)
This, new grads, is a colossal mistake — don’t figure out the bare minimum you need to live on; figure out what you’re worth. Those numbers should be two very different things, and the latter number should be a lot higher! Ask for what you’re worth, and then ask for more than the first offer a company makes you.
Here are just a few reasons to negotiate your first salary offer:
- Your initial salary at a company defines your future raises, which are typically given as a percentage of current salary.
- Your retirement contributions are made as a percentage of income, and if you earn more, that dollar figure gets bigger (plus your company match will be higher!).
- When you switch jobs, your new employer often asks for your salary history and may base your compensation on what you’ve been earning historically, rather than what they have budgeted for the position.
- Even if you later find out that colleagues with similar experience and job titles are earning more than you, you’ve accepted an arrangement that’s difficult to change once you’re in the position.
- You are expected to negotiate a salary offer! In almost all cases, the company will intentionally offer a figure that is lower than the top end of their budget. Ask for more money — you’ll probably get it. (And if you don’t, ask for other benefits: more vacation time, a flexible or work-from-home schedule, a quicker vesting retirement plan.)
Salary negotiations are hard for many people, especially women, and I still don’t think I’m very good at it. Even though I’ve managed to do better for myself with my subsequent job changes, starting at such a low salary has cost me thousands of potential dollars for each year of my career.
Have you successfully negotiated a salary offer? What tips do you have?