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Do you know how much you should be getting paid? I spent two years interviewing approximately 100 women about their experience negotiating their own pay. I’d ask them everything: how much they made, how the conversations went, and how much they decided to ask for. And, they were completely candid.
The thing that frustrated most of them: Not knowing how much they should be making. Compensation information is important for everyone to know, but especially for women who, on average earn less than men.
If you don’t have a company culture of embracing pay transparency, like Buffer that publishes a listing of all of their salaries, it can be tough to know what to ask for and whether you’re making enough. Crowdsourced salary information can be a helpful starting point, but it may not always give you the most reliable pay data.
How do you get a better estimate of your market value, so you can make sure your salary matches your peers?
Pay transparency is a good place to start. If you know the salary range for other people with similar job experience and job functions, you have another benchmark you can use to gauge whether your pay is on track or lagging behind. And if you find that you’re being underpaid, that may just give you the push you need to start your own salary negotiation.
The Impact a Raise Can Make on Debt
At any point in your career, salary transparency and being paid fairly can have a large effect on your finances. But if this is done at the beginning of your career, the result can be dramatic.
In fact, a higher salary can leave you over a half-million dollars richer, according to one study by Michelle Marks of George Mason University and Crystal Harold of Temple University. They found that, on average, people who negotiated increased their annual salary by $5,000. Using that data, they calculated that a 25-year-old who negotiates an increase in their starting salary from $50,000 to $55,000 would, over the course of a 40-year career, earn $634,000 more than someone who didn’t negotiate.
That pay gap, undoubtedly, can have a huge impact on someone’s retirement. But what can this do to help your current debt?
The average student loan borrower in the graduating class of 2016 had a student loan balance of $37,172. What if they negotiate an increase of just $1,000 more per year and put that entire amount towards their loan?
They’d pay off their student loans much faster. Assuming the loan has a 5% interest rate and a ten-year term, it would be paid off two years earlier and the borrower would save $2,267 in interest payments.*
If instead they negotiate for an extra $5,000 starting salary, like in the study and put that additional money towards their loan, they’d be done with their loan in just over four years and save $5,924 interest.*
Knowing if you are being paid less than your peers can give you the motivation to ask for that raise. Even seemingly small changes in what you can put towards your debt can add up to saving you years of payments and thousands of dollars.
Tips for Talking About Salary
Talking about salary — or money in general — can be awkward. But like with anything, practice and a little knowledge can help.
From interviewing successful and not so successful negotiators, I learned a lot that has helped me to become a better negotiator (though, like anything, it’s still a work in progress). Here are some of the best tips I learned when it comes to talking about your salary, and asking for more.
Learn how to ask
Few people I’ve met were comfortable asking someone, “how much do you make?” But many of the women I interviewed found a better workaround: they asked for advice. If they were interviewing for a new position or trying to gauge the raise they should ask for, they opted to ask, “if you were in my position, what would you ask for?”, or “I’m thinking about asking for X. Does that sound right to you?”
Asking for advice can put people less on edge and can lead to a productive conversation where you get to learn more than just someone’s salary.
When you know how much someone else makes, it may be easy to get caught up in the comparison trap, especially if you earn less. Keep perspective as you’re gathering information. It’s important to keep in mind that your company benefits, duties, and experience can all play a part in determining how much you make.
Talk with a broad range of people
This tip I learned from Harvard Kennedy School Lecturer, Hannah Riley Bowles. Reach out beyond your convenience networks. For example, women who ask for salary advice from other women are likely going to come up with a pay range that is lower than if they were to ask both men and women. Why? Because women are, on average, paid less than men.
Expand your circle of people who you look to for advice and you might come up with better results. Talk with your male counterparts, agency recruiters, hiring managers, human resources, and anyone else who might have insight into your industry.
Keep the lines of communication open
The people who were the most successful with negotiating a raise didn’t just ask for one during their annual review. They kept the lines of communication open with their boss throughout the year by asking for feedback as well as asking what they needed to do to be considered for a promotion and/or raise in the future.
Even the women who didn’t seem to have an exceptionally close relationship with their manager felt they were successful with the conversation because they didn’t just spring a big ask for more money out of the blue. By the time annual reviews came around they had already established that they were proactively working towards moving up.
Talking about salary can be uncomfortable at first, but it can help you get a good sense of what you should be earning and give you the confidence to ask for more.
*All debt calculations are done using calcxml.