Salary negotiation: get paid what you're worth - by Better Money Habits®

What you earn in your 20s greatly shapes what you earn for the rest of your life, according to a 2017 report from researchers at the National Bureau of Economic Research. Big salary jumps are generally harder to come by later in your career, so here’s how you can start strong.

It’s easier than ever to find out how much jobs pay. You can check comparable positions and salaries on job-listing sites such as PayScale.com, Salary.com and Indeed.com. Other sites, like Glassdoor.com, review company culture as well as compensation.

You can use these data points to understand what someone with your résumé might earn. It’s also a good idea to supplement any online research by asking friends or acquaintances in the industry what type of salary you can expect.

Next, consider your talents and skills. Every work or educational experience—even that summer nanny job—leads to the development of certain expertise. When it’s time to talk salary, highlight what you learned from any retail gigs, internships or leadership roles (if it’s relevant to the current position). And don’t be shy about sharing personal details that may offer an edge. 

Companies may want to discuss salary early on to ensure you’re both in the same ballpark, but you may have more success negotiating if you can avoid throwing out the first number.

According to Andrew Porter, director of behavioral finance at Merrill Lynch, once the employer has thrown out a number, the best tactic is to show you’ve heard them by anchoring your response on that number.

From there, use your research to negotiate. Justify your request with intel from previous jobs, your industry, or the firm itself. Once you lay out your reasoning, ask something like: “Would you be able to pay X?” Name a number that is higher, but not so high that they’re turned off.

The employer may not be able to raise the salary—it may be all the business can afford, or the company may have preset pay levels. If that’s the case, ask about other ways to improve the offer, such as a bonus, deferred compensation or better benefits, which can really affect your bottom line. Consider how extra vacation time, flexible work arrangements, fully or partially paid health insurance, a 401(k) match, and tuition or commuter benefits can add both financial value and a lifestyle boost.

Tip: If your negotiation isn’t successful, you could ask for a six-month review, with predetermined criteria for a raise at that time. It shows initiative and a commitment to achieving more.

If you’re already working and looking for a salary bump, go ahead and ask. Justify your request with your career victories and how they helped the company succeed. But don’t assume your boss has been tracking your successes; it’s up to you to keep a log of accomplishments.

Avoid bringing up details about your personal situation. It’s not about your roommate bailing, paying for a wedding, or that long-postponed trip to Costa Rica.

Also be sure to keep it real: Try your best to understand your organization’s current condition. Has there been a hiring freeze? Are quarterly profits down? Don’t neglect your own needs, but it’s wise to acknowledge your company’s financial situation. It shows you’re paying attention and that you get the big picture.

While you’re negotiating, don’t make these rookie mistakes:

If you don’t get a raise, find out why and ask your boss for suggestions on how you can improve. That can set you up for success on the next go-round.

Whether you’re negotiating your first job offer, your fifth or for a raise, always keep in mind your best alternative—whether it’s unemployment or a competing offer. (If you have one, it’s fine to share the details as you negotiate—but never make one up.) That can make your final decision easier, once your options are clear.

The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.