How One Salary Negotiation Can Make You Half a Million Dollars

Negotiating can be scary. I get it.

If you tend to accept the first offer you receive, you're not alone—you're actually in the majority. Fifty-six percent of people do not negotiate for better pay when offered a job.

People avoid negotiating for a few reasons:

  • 51% don't feel comfortable asking for more money;

  • 47% are afraid the employer will decide not to hire them;

  • and 36% don't want to appear greedy.

I acknowledge these reasons, but they're unfounded. These reasons are typically rooted in deeper fears—like the fear of rejection and the fear of being told, 'No.'

Oof. I know that's heavy.

But here's the deal: brilliant people are leaving money on the table. Money the employer is ready and willing to pay them.

You need to negotiate. Here's why!

The Power of Negotiating a 5% Increase

Let’s say you are offered a $50,556 salary (the average new grad salary across 10 broad degree categories). You negotiate the offer with human resources and agree on a 5% increase ($2,527.80), or $53,083.80. That’s realistic and achievable.

I’ll round down to $2500 to make things simple. Let’s say you invest that $2500 at age 25.

You choose to invest in the S&P 500. Adjusting for inflation, the average rate of return on the S&P 500 is about 7%. Over the next 42 years—until your full retirement age of 67—that additional $2,500 can turn into $42,860.64. Not bad, right?

The Power of Negotiating Early in Your Career

Now, consider the fact that your salary will likely remain $2500 higher every year after that negotiation. This means, your overall investment can be much higher.

At age 25, you invest the 5% increase ($2500).

Over the next 42 years, you continue to invest the same amount each year ($2500 = $208.33/month).

By age 67, your investment is worth $659,801.

You started with an initial balance of $2500, contributed $105,000 (42 years X $2500/year) and received an additional $522,301 as a result of compound interest.

For this math, I used Dave Ramsey’s Investment Calculator.

That’s why you should negotiate.

That scary conversation isn't nearly as scary as missing out on more than a half a million dollars.

Overcome your fear and always negotiate. Your future self with thank you.

Want to know my salary negotiation tips, plus exact words I used to land a 5% increase?

Join the Love Your Monday Email Club and I'll send you my guide: 'How to Negotiate a Job Offer: Salary & Benefits.'

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