This title isn’t meant to be clickbait but I know it sounds too good to be true, so bear with me here and you’ll see the power behind this.

The gist of it is this: people put too little thought and effort into negotiating salary, to their own detriment, when the truth is that, if you took the time to negotiate and were able to get even a little more money, you’d be set up to make upwards of $500k or more over the course of your life.

Disclaimer: My undergrad was in physics, so I might be a nerd and do enjoy working with numbers. That said, I’ll keep the numbers simple and round, as this is just a hypothetical illustration.

Where else can you earn thousands and thousands of dollars in an hour?

Remember when you got your first job and thought about how much you made per hour and what you could do with it? My first “job” was as a soccer referee on Saturdays. I started when I was 10 years old and refereed games for kids that were 7 and 8. In my first games I think I made something like $8 for roughly an hour of work. I could spend a Saturday running around and make, on a good day, somewhere around $30. Not bad for a 10 year old kid!

That job was fun, but it was a lot of work. I was running up and down the field for an hour in the hot sun, eventually making $45/game as an older teen. The catch was that no matter how many games I did I would only make a set amount per game; in short, there was no way to make outsized gains.

Fast forward to now, and after a decade plus in my career and with a number of years investing in the market or evaluating companies for investments t I can tell you that the big growth in life, or the needle movers that you hear about all come from moments where there’s an asymmetry between the opportunity for outsized gains and the amount of work or risk involved. These moments don’t exist very often, but when they do you HAVE to jump on them.

What are examples of small moments with huge potential for outsized gains?

• College entrance exams (perfect score on SAT, GMAT, LSAT, etc. can make a HUGE difference in getting you into a top school, while a poor score can cripple those changes)
• Job interviews (nail the interview and you can get a better job, more senior role, etc.)
• Investing in companies (research well, find a company poised for growth and take a change. Or bitcoin – I looked at it back in 2009 and it was cheap enough that I could have easily thrown some money at it with possible downside of only losing a couple hundred dollars, and look where the upside is now…)

Yes, I mentioned making a couple thousand dollars in an hour, so what did I mean? Simply this: negotiating your salary upfront is a HUGE OPPORTUNITY for outsized gains, and one that you need to take advantage of.

Think of it this way: if you can negotiate for an extra $10k of salary in your final interview / phone call, then you’ve earned thousands of dollars in less than an hour. How often do you get to do that?

Now take that extra money, and stretch it over a lifetime of working

Let’s continue the example of you negotiating your salary at a new company, where they offer $100k and you have a chance to counter.  From there, we’ll model out how your income would fluctuate over a lifetime with some simple assumptions, outlined below. Again, this is overly simplistic, but it shows the outsized gains you can expect if you are able to negotiate well.  

• Age: assuming you’re 30
• Salary offered by company: $100,000
• Yearly Raise: 2%
• Retirement age: 65
• 401k match of 3%
• 401k growth over 30 years: 7%

Starting with this information, let’s look at how things may change if you’re able to negotiate a better amount than the original $100k, like starting at $105k or $110k. I’ve mapped it out for you in the following table:

Look at that difference! If you’re able to negotiate a $10k raise up front, and that flows forward over the next 35 years, then you stand to make almost $600k more than if you started at $100k, including $500k more in salary. And that life changing amount of money is unlocked over a very brief part of the hiring process (i.e. 15 minutes) where you can counter an employer’s offer.

The same raise you negotiated at this company can impact your salary even more when you switch companies for a new job

The example I gave above assumes you stay at the same company for 30 years, with a set raise of 2%, which isn’t very typical. The fact is that most people change careers 3 or more times (with some reports that 75% of workers under age 34 favor moving jobs less than 2 YEARS after starting), and if you move and get raises when switching, then doing this practice multiple times will yield massive results over the lifetime of your career.

If you don’t negotiate now, you won’t get to later

I can’t say this loud enough, but it’s true! If you don’t get a 10% higher amount than their offer now, there is absolutely NO WAY you will get a 10% raise for your work in the same position down the road. Why would they pay you more when you already agreed to less? Very few companies (I’m looking at you Netflix) will proactively go to you and offer to pay you more if you’re below market, so don’t hold your breath. Your time to negotiate is when the offer is made, and once it’s accepted the time is up and it’s too late.

The takeaway? Negotiate!

Hopefully this article convinces you to make an effort negotiating your salary as part of a job offer. As I showed above, the job offer situation truly is a rare opportunity to make outsized gains for a small amount of work. If you don’t feel comfortable negotiating, it’s time to learn, because it will pay off immensely.