I recently came back from a vacation in Hawaii, and believe it or not, I got a job offer! I didn't mean to get a job offer, but between eating some white puree mangos for breakfast and hitting the waves for some boogie boarding, I decided to reach out to the head of a major wealth management firm over e-mail.
To my surprise, he responded the same day and CCed his assistant to set up a meeting. After an hour over coffee, he asked when I could start? I told him I had to think things through since my roots are in San Francisco. As any good blogger does, I wrote a post entitled, “Would You Take A Steep Pay Cut To Live In Paradise?” and allowed it to percolate and help me think. Have a read if you want to know more.
In this post, I'd like to go through some mental exercises to do if you do get a job offer you like but feel the pay is too low. I plan to go through some of these steps and so should you. I'm meeting up with the gentleman next week (yes, I'm going back to Hawaii), and will report back my findings.
TIPS ON NEGOTIATING A HIGHER SALARY
* Know your worth. The worst thing you can do is accept a job offer out of desparation, and realize you're being severely underpaid after the fact. Resentment will fester until you quit. It's important to know your worth by checking online sites such as Salary.com, Glassdoor.com, career forums and with financial bloggers. Congruency is key.
* Know the market. Hawaii is famous for paying less and costing more. The reason for lower pay is because Hawaii is paradise. Firms in Hawaii don't need to pay up to attract talent. Salary for doctors in the boondocks are way higher than in major cities like New York City and LA to start, because the desire to live in the boondocks is lower. You can't approach your potential employer and demand X, when the market is at X * 80%. That will just show your ignorance. Make sure you know the local market wages.
* Calculate expenses. If you don't have to move for your new job, great, ignore this. However, if you do plan to move, also take into consideration food, gasoline, taxes, and education costs. Furthermore, you should peruse property you realistically plan to rent or buy in your area of choice. Honolulu is actually about 30% cheaper than San Francisco on a like-for-like price per square foot basis.
* Calculate your total income and assess how you feel. If you are taking a paycut to move closer to family, or to a nicer place, calculate what the environment is worth to you to. Take your new salary and add on your various income streams to see if it feels right. Have an salary idea in mind before the heavy salary negotiations.
* Talk salary last. Do not give the impression that all you care about is money. Money should be the last thing you bring up. In fact, don't bring up money until they bring it up first. Instead, you need to focus on the reasons why you are good for the job, what you can bring to the table, and your long-term commitment to the job. Nothing is more maddening than a manager losing an employee just 6 months into the job.
* Anchor high. When the inevitable topic of salary comes, always anchor higher than you'd be willing to accept. The anchor must be within reason, obviously. For example, if the offer is $100,000, and you know the market is $90,000 to $110,000, shoot for $130,000 and highlight the reasons why (your clients, expertise, your wife/husband, kids in school etc).
* Never give an answer right away. Waiting is a very powerful negotiation tactic. It shows you are level-headed, are not in a rush, and potentially have other job offers lined up. Your distance will make an employer want you more.
FINAL SALARY AND JOB CHANGE TIP
Always join people, not firms. Get to know your hiring manager and your future colleagues as much as possible. They won't mind having lunch and drinks with you. It's for your own good, and for their own good as well. You will be spending more time with them than some of your loved ones, so you better get along!
I'm looking forward to meeting up with my potential new employer. If nothing comes out of it, at the very least I'll make a new contact and eat some good food!
Start your own business: If you feel you're not getting paid what you're worth and want to boost your income, start your own business online on the side! It used to cost a fortune and a lot of employees to start your business. Now you can start it for next to nothing with a hosting company like Bluehost for under $4/month and they'll give you a free domain for a year to boot.
Brand yourself online, connect with like-minded people, find new consulting gigs, and potentially make a good amount of income online one day by selling your product or recommending other great products. Not a day goes by where I'm not thankful for starting Financial Samurai in 2009. Here's my step-by-step guide to for how to start your own website like mine in under 30 minutes.
Updated for 2020 and beyond.