Today on Financial Toughness we’re going to talk about: How to Negotiate a Higher Salary Raise.
Step 1: Pre-Preparation
The best time to prepare for a salary negotiation session is not a week or so before the meeting. No! Three months leading up to the raise, get in gear. I want you to go above and beyond (e.g., spend more hours, cover someone else, get involved with team projects, etc.)
Step 2: Quantify your value. During those 3 months I want you to document all the tangible results you are bringing. Increase revenue, Cut costs or Increase the client base
Step 3: Know what you want to ask for by researching comparable salaries:
Step 4: Add a few $$ or percentage points to what you’re going to ask for. For example, if you want a 5% raise, ask for 8% and back it up with your VALUE. If they give it to you, great! But, if they negotiate down, to 5% YOU'RE happy and the manager feels like they also won; win- win.
Step 5: Prepare your argument
Use the information you gather in step 1 and 2 and also present your research and finding online about salaries and “comparable value”.
Step 6: The Meeting
Scenario A: Boss says, "You get to go first: “How do you think you’re doing?” You say, “I knew you were going to ask that question, so I’ve prepared a few things."
Scenario B: Boss starts and they go first and tell you. Listen carefully especially for point of disagreement. so when it’s your turn, stick to your plan, but along the way, address those points of disagreement.
This strategy only gets you to breakeven; not ahead of the financial curve.
Calculating Your Magic Number
Now let’s go back to a Net Income (take home) = $4,000
Total Expenses = $5,000.
You also have a debt = $10,000 and Savings = $0.
Your Plan: You agree to pay an additional $500 to the Credit Card debt and Save $300. That means:
Net Income (take home) = $4,000
New Total Expenses = $5,800 ($5,000 + 500 + 300)
Monthly Balance = -$1,800
So your Magic Number = $5,800 which is the amount of money you need to make to pay your expenses ($5,000) + Service your CC debt ($500) + Save ($300).
Now, you're $1,800 short of hitting your magic number (i.e., $4,000 income minus $5,800).
Option: So the first step is to see if you can reduce your expenses. Let’s say you reduce your expenses by $500 from $5,000 to $4,500. That means your New Magic Number is $5,300 ($5,800 - $500).
That means you’ll need to increase your income by $1,300 ($4,000 - $5,300) to hit your magic number.