Don’t Negotiate and Lose Big

My first three salaries I didn’t have the guts to try and negotiate salary. When I went to by my current apartment, I didn’t negotiate.

Retrospectively looking back at these decisions, the costs total to me over $100,000 in either lost income or expenses.

My First Jobs

My first job came on the heels of the Great Recession and I was counting my blessings to even have a job at that time. Of my 12 friends from college, a good college, who had decent grades and internship experiences, only 9 had jobs walking into the market after they graduated. I wasn’t interested in countering. I simply said “Yes”.

It was an entry level role at a large consulting firm and after about 3 months I found out that most of the people who had started in the same group as me were making $11k more than me on their starting salaries. The rest were making $5k more than me. A the time for me, I was still paying off student loans and that money could have been put towards paying them down or helping to max out my 401k, which I wasn’t able to contribute to beyond my company match. While I got a 6% raise after a year, I was still far behind my colleagues who also saw similar pay bumps.

However, every job sets the stage for the next when you’re determined to quit up.

My next role was a cofounder of a small software development company and I made about 40% more in salary, but the company was small and had mediocre health insurance and no 401k benefits. There was no negotiation here, but the 40% pay was a great bump. However, I robbed myself of the interest I could have earned over my lifetime, which probably dwarfs the benefits of that pay bumps after tax increase to my available savings.

After skilling up and more experience in my new field, I quit that job, taking a nice chunk of exit-equity with me.

I took a job with a 15% pay increase (I consider the minimum allowable pay increase for a job change to be 12% all in benefits), but this job also didn’t have a 401k, which cost me quite a bit in opportunity cost to let my money compound over my lifetime. Retrospectively, it probably was my worst career move.

I barely met the minimum of my total compensation increase and worst thing, I didn’t negotiate again. I knew the market rates for my role were around 10% higher than the offer I accepted and I didn’t do two critical things – the first is ask for the going market rate for the role, and the second was to negotiate once I received an offer.

All I needed to do was push back and say, “I have another offer and I think another $5k will seal the deal for me and I can accept this afternoon if we can make that work.”

House Hunting

While I was paying attention to the deal numbers that would make my purchase profitable after moving in and doing a move-in then rent-out style rental deal, I certainly didn’t think hard enough about negotiating the price on my first apartment.

Had I negotiated a better deal, I would have had to pay about $27.5k less than I actually ended up paying based on the market rates for comparable apartments at the time.

We went into the process wanting to make a solid offer in a hot market to get the deal through as fast as possible. What I should have done was push up from a lower offer to a higher one to meet the seller where I could truly get the best deal. This tactic is used by real-estate investors all over the country and in my case, I was either too stupid to do my homework on how to approach a bid or too naive to care, forgive me if I don’t remember.

Totalled Up Missed Opportunities

First Job: $11k (max)

Second Job: $76k (Opportunity Cost from missing 401k benefits)

Third Job: $30k

Apartment: $27.5k

Total Missed Opportunity Dollars: ~$144,500

Summary

When it comes to negotiating, don’t be afraid to push back a little. All you can hear is a “no” and it’s unlikely you’ll lose an opportunity as a result. You can always say your still interested in the deal – be it a new role, a home, a boat, or whatever!

If there is money changing hands above $100, you should negotiate it. It’s a muscle. If you can negotiate buying a used pair of ski’s off craigslist, you’ll be able to feel comfortable pushing back and asking for more (or less) when it comes to the high-stakes decisions in life, of which there are relatively few!