Ramit Sethi on ABC News "Money Matters" - Salary Negotiation

Well, most people probably liken negotiating salaries to public speaking. It really isn't the most desired activity. Some may even prefer a root canal than to have to toot your own horn and eke out more money from your hiring manager. So if you want to get paid what you're worth, you better learn how to do it right. To teach us the basics of negotiating and help you get the salary you deserve is Ramit Sethi, author of I will teach you to be rich, as well as founder and writer of iwillteachyou to be rich dot com. Welcome back, Ramit. Good to see you again.

Thanks for having me.

So, Ramit Pete, why are so many people bad at negotiating their own salaries?

You know, we're afraid. And I think it's so funny because if you take just 10 minutes to prepare and a few hours to really understand how you can negotiate your salary, you can often make thousands and thousands of dollars, and companies don't look down on it. So it's something that we all need to do. We're just very nervous about doing it.

Now you're going to teach us the basics, and the first thing you want us to remember is. This is harsh. Nobody cares about.

No, nobody cares about you. You know, when people go to negotiate, the first thing they typically do is talk about how much they want to make. Look, as a hiring manager, frankly, I don't care what you want to make. Okay? What I'd like to do is sit in the back of a limo with two twins eating nachos in Vegas. But that doesn't mean it's gonna happen. When you go to negotiate, you want to make sure that you're talking about two things, because these are the only two things your boss cares about. How you're gonna make him look good and how you're gonna help the company do well.

So if you accomplish that and ask for a million dollars, you'll probably get it.

The other thing is you have to be realistic, right? So sometimes people go in with a highly inflated sense of how much they want to make. But there are ways to actually make sure that you're targeting the right amount that you're asking for.

So you really have to keep in mind that when you're going into these negotiations that, quote, nobody cares about me. So how should we approach the negotiation then?

The first thing you want to do is make sure you're talking about how much you're offering the company in terms of value. So you don't want to say, yeah, this is going to cost you an extra 10k because I negotiated the hell out of you. Instead you want to say, look, I understand the company's strategic goals. Here's my plan for what I'm going to do to help you get there. And as you can see, I'm going to be help driving a million dollar initiative. So let's talk about. And the key phrase here is, I think we're in the right ballpark. Let's just find a way to make it work for both of us.

Oh, I like the way that sounds. Now to the second tip that you have, and this definitely sounds like a bargaining chip. Have another job offer and use it. Now, that might not be so easy in this current economy.

Yeah, times are tough. Absolutely right now. So some of these tips you're going to have to use at your discretion, especially knowing the company you're either currently working at or trying to work at. But there is no better way to improve your odds of an improved salary than to have multiple offers from other companies.

Okay, now this next one is pretty obvious, but you've got to come to the negotiating table prepared. How do you come prepared? What do you need?

Well, most people never come prepared at all. They simply walk into an interview and they say, yeah, I think I'd like to make more or oh, this is fine. And then they feel bad afterwards. What you want to do is first go to salary.com and payscale.com, look at what an ordinary person in your position would make, and then be prepared to tell them why you are extraordinary. Make sure you talk to people at the company who either currently work there or better yet, worked there in the past so they can tell you how the company actually works and what they value. And then remember the key thing. Make sure you bring a plan to your negotiations so your boss can look at it or your potential boss and say, oh, this person is going to add a lot of value to the company.

All right. I think many people tend to forget this. Next tip. It's not just about the salary. There are other ways to get more. And your next tip is exactly that. You have to negotiate for more than money. So what are you talking about here? Vacation?

Yeah, there's tons. I mean, there's flexible schedule, there's annual bonus, there's continuing education. There are a million different benefits that companies offer. And we tend to fixate on cash. And companies are obviously the most sensitive about cash. But there are a million other things. And your line here is, let's talk about total comp compensation. Remember that companies are often willing to give you more in certain areas, but less in other areas. So you can use those levers strategically for the things you care about and concede things for the things you don't.

And I guess you would need to keep in mind, too, that you want to look for opportunity for advancement down the road and ask for that at the negotiating table.

Absolutely. You don't want to try to. You don't want to ever negotiate someone and so that you both walk away feeling bad because you're going to have a working relationship with this person. So think long term. And often you may want to concede a little bit more up front because you know that your potential for advancement is huge down the line.

This next tip is so, so cute. And you say all you have to do is just smile. So you shouldn't be too serious here. I'm guessing that's what you mean here.

No. Look at this smile. I mean, how can you resist? If you smile in a negotiation, it disarms what can otherwise be a very tense situation. So make sure you go in there, you're comfortable, you're confident, you're not begging, you're not reprimanding, you're confident and comfortable. And you say, look, I know I can get a job elsewhere, but let's talk about how we can make this work for both of us.

You don't want to seem desperate, right?

No, absolutely not. That's why having multiple offers is a great thing. It's kind of like seeing the hot girl in the bar that's surrounded by guys. You want her because everybody else wants her, too. So let the companies know that you're talking to other companies. In fact, let them know that you've had an offer made. You're under no obligation to tell them what companies or how much they've offered, but your value goes instantly up when you show that other companies are interested in you.

All right? And lastly, you say, if it's not going your way, save face.

Yeah. If you just can't get the recruiter or hiring manager to budge, then what you want to talk about is, you know, two things. One, you may say, all right, I want to walk away. Or two, you may say, I'm willing to take a reduced salary from what I think I'm worth. But you want to make sure you save face. So let the manager save face. And you save face as well.

Okay? So let's pretend here for just a moment. My line would go something like this. Sorry, there's no room for negotiation. The offer is finally, what do you say?

Well, I understand the times are tough right now and but I'm very excited about this challenge and I think you'll see from this plan that I think I can bring a lot of value to the company. Would you be willing if I do an extraordinary job in six months if I just knock your socks off, would you be willing to talk about renegotiating or looking at this compensation plan again? They'll say yes, of course. And you say all right, well, let's get it in writing and I think we're good to go. I'm really excited about this challenge.

Good answer. You're hired.

I love it. Awesome.

Okay, well, Ramit, as always, thanks so much for all your great tips. It was great to see you again today.

Thanks again. I appreciate it.

And for more, you can always check out ramit's in depth negotiation videos and tips. That's right. They're all@iwillteachyoutoberich.com negotiation.