Undervaluing yourself in wage and salary negotiations can be one of the biggest hindrances to building wealth. Fear and scarcity mindset is why we do it though.
There are so many aspects to our financial life, our income specifically, that are out of our control. But not everything. For one thing, our salaries.
A few years ago, I went massively overboard for the company I was working for, going way beyond the call of duty, building new systems, taking extra special care of clients, and generally being indispensable.
And after coming back from a successful business trip, I asked for a big raise.
And got it. It was 14% on an already generous compensation package.
But going to my boss and saying, in effect, “I’m worth a lot more than you’re giving me” was a hard-learned lesson, one that I learned by doing pretty much the opposite many years before.
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RIP Best Products
I was 17 and taking a semester off.
I had basically $200 to my name, and while my only expenses while living at home were my late-night Denny’s runs with friends, my money was still going to run out soon.
So I went looking for a job.
After a long search, I found one at the now-defunct Best department store (no, not Best Buy, Best, a.k.a. “Best Products“). I applied to work in the electronics department, being a bit of a computer nerd and thinking it might be a marketable skill.
Ask your wage
In the office, the store manager and I chatted for a bit, and eventually, the talk came to wages.
Now, you should understand that I had little job experience, and certainly no experience in bargaining for wages.
You should also understand that, for context, the minimum wage at the time was $4.25 (worth about $7 today).
So when the store manager asked me what wage I was looking for, I panicked.
What was I worth? What could I get? What did other people get? I knew none of these things.
What I did know was that I was fearful that if I didn’t get this job, then no other job would be available for me, possibly for a long time.
So I said, “how about $5?“
The manager said, “sure, we can do that.“
What I later learned was that I could have gotten more than that. Indeed, my co-workers, none any more skilled than I, were making much more.
But fear and the belief in scarcity led me to lowball myself and my worth.
And congratulations me! I got exactly what I asked for.
Can you ask for too much?
Now, if I had asked for $8 an hour instead of $5 would I have gotten it? Probably not.
Would I have gotten more than $5? Almost certainly. Maybe not much more, but more.
(And if I had really known what I was doing, I would have made the store manager throw out the first number. That’s always the strongest way to play this game.)
I don’t believe that I could have given a number in good faith that would have led to the manager not even giving me the job. (I wouldn’t have asked for $50 an hour with a straight face, of course.)
All that the fear and the scarcity mindset led me to do was to undervalue myself.
Think about that: because of my fear, I was poorer.
Are you undervaluing yourself?
What indications, big and small, are you giving that show the world how much you’re worth?
Are you going to not ask for a raise because you’re afraid of the pushback? If so, you’re going to be poorer.
Are you going to negotiate based of fear, not based on your own, natural, exceptional worth? If so, you’re going to be poorer.
For most people, our income is where we build our wealth. So undervaluing yourself is one of the biggest stumbling blocks to personal wealth building.
Because salaries don’t happen in a vacuum. Your future salaries in jobs are related (fairly or unfairly) to salaries you’ve had before.
(Yes, it sucks when future employers ask how much you made in your last job. They shouldn’t ask that, and it’s illegal in some places. But it happens, and it affects your salary negotiation.)
I never want you to lowball yourself. The fear of the job being snatched away from you isn’t going to be based on the number you throw out. It’s going to be based on how you carry yourself.
If you offer in good faith, are flexible and open to negotiation; if you’re respectful to the job-giver while being respectful and confident about what you offer, you will make more money. And you will have helped yourself build wealth faster.
(And as a postscript, that company went out of business less than a year after I started working there. There was no correlation, of course, but I always would like to think that maybe they went out of business because they lacked the ability to negotiate effectively with their suppliers or creditors. Wouldn’t that be great?)