How to Effectively Negotiate Salary

Chances are you’re underpaid. Here’s I Will Teach You to Be Rich founder Ramit Sethi’s advice for getting what you deserve.

August 11, 2016

Everyone’s been lowballed on salary compensation at some point. That’s a rite of passage and, especially when you’re just getting your career started, there isn’t much you can do about it.

Except that according to our friend Ramit Sethi, founder of I Will Teach You to be Rich, that isn’t the case at all. Most underpaid people are afraid to ask for more money simply because it’s such an awkward situation.

So here they are, ladies and gents. The secrets to negotiating a higher salary adapted from Ramit’s abundant video content on the subject. Be sure to thank us when you’re relaxing on a private yacht off of St. Kitts.

Things to keep in mind

First off, the best way to negotiate a higher salary is to earn it. By that I mean you have to be a top performer at your company. If you’re average or below average you probably don’t deserve a raise and, therefore, will have a hard time getting anything substantial.

This isn’t a “how to trick people into giving you money” guide, but rather a “way to be compensated correctly based on fair market rate and your contributions to the company” guide.

Also, try not to take any of this stuff personally. Managers, executives, and corporate entities don’t care that you want to take the family to Hawaii or that your dog needs an expensive surgery. At the highest level it’s all about getting the best results at the lowest cost.

Is it worth them spending $65k on you rather than $50k on someone else? Maybe, but maybe not. You need to prove that they’ll get a greater return and justify the higher salary through extraordinary performance.

Or in the words of DJ Quik, “If it don’t make dollars, it don’t make sense.”
Alright, on to the first step.

Step 1 – Do your homework

Check the websites payscale.com, salary.com, and glassdoor.com to get the exact salary range someone in your role and with your experience should be earning. You can triangulate by geography, type of company, or even by your current employer. The more accurate the better.

Once you’re armed with hard data, set up a special meeting with your manager just to talk about your compensation. Don’t tack it on to your weekly 1-on-1. The goal is to make your boss almost painfully aware that you feel unfairly compensated and that the time has come to start the conversation.

But, if you really want the biggest leverage possible, get a competing job offer. Seriously– start a bidding war. Something with a higher salary is obviously preferred but even if everything’s comparable, an offer will allow you to shift the power dynamic of who’s courting whom.

Step 2 – Have the meeting

This is your time to shine so make sure you come in full of confidence and with a smile on your face. Both parties know what’s about to go down and 99% of the time it’s awkward as hell. The more you can diffuse tension the better it is for your manager, yourself, and your monthly paycheck.

Start out with the positives. Talk about how much you enjoy working at the company and how well you’ve performed (or expect to perform). Then approach the subject of how you feel you’re being compensated unfairly.

This is the conversation’s anchor so keep reiterating it as often as possible: you want to be there, you’re a good performer, and you want to be paid fairly.

Next, present the data in a non-threatening way. Something like, “Based on the numbers here, it looks like I should be paid about 15% more (or whatever it is).” Ask for an immediate adjustment to the average number and then discuss how you’d like to hit the top salary range by doing an extraordinary job over the next 6 months.

Extraordinary. Remember that. This isn’t you doing the same old stuff as everyone else. Make it clear you are a top performer and will do everything you can to earn the money you deserve.

If they’re maxed out on salary then feel free to throw other forms of compensation on the table like stock options, a flexible work schedule, or extra vacation days. Anything that sweetens the pot enough so you feel fairly compensated.

And most important of all… remember to smile! Even though it can be uncomfortable, this shouldn’t be an adversarial situation.

Step 3 – Use psychology to your advantage

The last thing you want to do is make your boss defensive. You’re on the same team so be sure to reiterate your anchor of how much you want to be at the company and how fair compensation is something you deserve or, at the very least, something you can earn. That could mean giving them the power by using questioning phrases like, “Would it be appropriate to…” rather than coming out with guns blazing.

If your boss needs some convincing, ask him or her for an accelerated review cycle to keep the doors open for future negotiations. Does your company do yearly performance reviews? Ask for 6 months. Maximize every opportunity to solicit feedback and highlight your contributions.

Another psychology tip: insist that you or your boss write down and agree on what will constitute an extraordinary performance. Literally write them down and be as specific as possible. For example: hit X number of closed sales accounts, increase conversion rate to Y percentage, or update Z process. If you leave it open-ended like, “be a better designer” there’s nothing concrete to judge whether you’re doing well or not. You want expectations so you can exceed them – so get specific.

Once everyone agrees on expectations, check in with your boss every 2 weeks about the goals. Constantly let her know how well you’re doing so after 6 months the review process is just a formality. Ramit refers to this as the “closing the loop” technique, which basically means following up so everyone’s on the same page.

Step 4 – Go forth and prosper

Wayne Gretzky said it best with his oft-quoted line, “you miss 100% of the shots you don’t take.” If you’re underpaid and a top performer, do yourself a favor and ask for a raise. But, before you start demanding more money from your manager be sure to set yourself up for success with these tools.

Do your homework, be patient (it could take as long as 6 months), and be extraordinary at your job.

Average performers are a commodity that are easy to hire and fire. Make sure you aren’t one of them before calling attention to your performance.


Learn more about salary negotiation:


Ramit Sethi is the New York Times best-selling author of I Will Teach You To Be Rich. He writes for over 1 million readers/month on business, careers, negotiation, and psychology. If you’re interested in launching an online business, get our exact, word-for-word funnel that generated $400,000: GrowthLab.com/400k


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