Financial Friday | Get Paid What You’re Worth

 

Last week we talked about taking care of your Future Self by paying a percent of your paycheck to your Future Self.  So how do you save more money?

Savings is simply the gap between your income and your expenses.  If you can increase your income and reduce your expenses, then the amount of money you can save increases.  It sounds fairly simple, but there are all kinds of psychological and emotional factors at play here.  What I’m going to share with you today may sound like career advice, but it has a huge financial impact.

Girl, you need to get paid what you’re worth. 

Most companies are not there to take care of you.  They aren’t looking at your salary and saying, “Oh look at Mary, she’s working so hard.  And oh look, she’s being paid below market.  Let’s give her a 10% raise!”  Nope.  Companies pretty much look out for themselves.  You need to know what the prevailing market salary range is for your type of position, and you need to make sure you get paid what you’re worth. 

Recently, I’ve had a couple of friends talk about how hard it is for them to quantify how much to charge people for their services.  They shy away from discussing their rates.  They cringe when they think about putting a dollar value on their time.  I think as women, we need to understand our value.  Even if you don’t work outside the home, you need to understand the value you are providing for your family.  How much would it cost to hire house cleaner, cook, childcare, etc. if you were not providing these things?  It’s not free!  So as employees, we need to understand the value we are providing to our workplace, and make sure we are getting paid properly.

Out of the nine promotions/raises (outside of normal cost of living adjustments) that I’ve received in my 25 year career, only two of them were just given to me.  The other seven times, I either pursued higher paying positions within the company, or asked for a raise/promotion. 

I remember the first time I asked for a raise, I was so nervous.  I was 28 years old and had just received my MBA degree while working full time.  I didn’t get a raise after getting my master’s degree.  I looked around at what companies in the area were offering new MBA grads without work experience and discovered that they were being hired at a higher starting salary than what I was making.  And not only did I have an MBA, I had five years of work experience!  So I wrote up a memo to my manager at the time, asking for a specific amount of salary, backed up with my data.  I nervously sent the email right before I left the office the night before.  The next morning I was called into my manager’s office and he was angry.  He asked me, “Are you intereviewing elsewhere?  Do you have another job offer?”  I said, “No, I just wanted to ask for a raise because new MBA hires are being hired in at a higher salary than what I’m making.”  He immediately softened and looked relieved.  You know why?  He thought I had another job offer and that he was going to lose me.  I was valuable.  So we talked more about the data, and he said he would talk to HR about it.  A few days later, I got my raise.  It was really hard to put myself out there, basically saying that I deserved to get paid what the position is worth.  But I knew that I would not be happy working there if I didn’t do it. 

After that first time, each time got a little easier.  I always researched first into what the market salary data showed for my type of position.  During the year, I would document all my accomplishments so that I had quantifiable evidence of performing at the next level.  I’ve also learned the sad fact that most of the time in the corporate world, if you don’t ask, you don’t get.  Yes, it’s possible they can say no.  But then you know where you stood and can pursue other opportunities if that’s what you choose. 

I’ve had friends say, ‘Yea, but I don’t want to make so much money that I stand out when they’re looking for people to lay off.”  This is actually quite a prevalent sentiment.  I have two answers for that.  First, you have to make yourself so valuable that nobody would think that your salary is not worth it.  One of the best career advice that I’ve ever received from a manager is “Always add-value to the process”.  She said, “When you send me a spreadsheet, don’t just send it and make me look at the numbers.  A monkey can do that.  Tell me the main things I need to know to make a decision based on the data, and even give me your opinion of the best two or three decisions.”  VPs and executives don’t have time to look at numbers and come to conclusions themselves.  I always took it upon myself to tell them what the data actually MEANS, what decision they need to make, and what my suggestion would be.  My job was not to be a spreadsheet jockey, my job was to be a major financial partner to the decision makers of the company.  Once the decision makers of the company know your value to them, they won’t hesitate to pay you what you’re worth.  Really.
Secondly, if you’ve been paid higher salaries the last few years and become laid off, so what?  It’s better than having been paid below market for all those years.  You have the money in the bank now.  Go find youself another job where they value your contributions.  It sounds flippant, but it’s true.  Don’t let the fear of making more money stand in the way. 

So let’s look at what the difference is between just getting maybe four promotions/raises in your 25 year career versus nine, the five additional promotions being that you received them because you asked for them.

That’s a 25 year lifetime earnings difference of almost $220k that you can take to the bank!  That’s not even including interest.  If you invested the difference in the earnings, you would have much more than $220k more.

Considering that earnings (just like investing) is not linear and is compounding.  The more you can earn early on in your career, the higher your lifetime earnings will be.  Because every single raise you get is based on your previous salary.  So when you get that 10% raise, the next year your 3% cost of living adjustment is based on your salary including the extra 10% you got last year.  So if you make $100k (just to make the math simple) and you asked for a 10% raise, you make $110k.  Then next year your 3% adjustment equals $3,300 ($110,000 x 3%) instead of $3,000 ($100,000 x 3%) than if you hadn’t asked for the 10% raise.  This compounding is what makes your lifetime earnings so much more if you get nine raises/promotions instead of four!

Now we’ve covered the increasing your earnings part of the savings equation.  Yes, there are many other ways to make more money, including side hustles, freelancing, turning a hobby into money, etc.  But to me, the most impactful way to make more money is to actually concentrate on your career, make yourself valuable, and asking for more pay.