Personal finance pop quiz: What's the most important single number in your household budget? Answer: Your income. And while you don't have as much control over how much you earn as you might have over how much you spend, you do have some. Now, one of the more effective ways to get a pay raise is to ask for one, but that can be a difficult conversation to start in any organization.
So in this episode of Motley Fool Answers, hosts Robert Brokamp and Alison Southwick are joined by Lee Burbage and Kara Chambers of The Motley Fool's People Team to discuss their best tips for making your case for more money. In this segment, they answer a key question: How long should you wait before bringing up your compensation with your boss? They consider the conditions that commonly lead people to open these talks, how to gauge the financial situation of your company, and more.
A full transcript follows the video.
This video was recorded on July 17, 2018.
Alison Southwick: How do you determine when it's the right time to ask for a raise?
Kara Chambers: One thing you can do is understand your company's timeline, and the typical pace. Be able to look at your salary history in some way and understand how often, what the pace is, so you can calibrate against that. If it's been a really long time, that's when I tell people, don't just sit back and wonder what happened. That's when you should bring it up.
Southwick: Define "a really long time."
Chambers: Typically, over a year is probably right. That's typical. Most companies have annual merit increase budgets, or something like that. So, typically, about a year.
Lee Burbage: I find, too, that if you're thinking in your head, if you're starting to tell yourself a story about what might be going on related to your compensation, and you don't really know the answers, it turns out, you can just go talk to people and ask. If you find yourself having those thoughts at night, like, "I wonder what's going on with my comp," or, "Haven't had a raise in a while," and you're starting to try to answer your own questions, that can be a good time to step forward and ask.
Chambers: I'll also add, sometimes, it's not necessarily the wrong time, but usually the only time people are asking for a raise is, they're really upset, or they got called by a headhunter. I used to do recruiting, and I would hear that you want to get the best person on a bad day. A recruiter could call, and you're taking that call, it's when you're at your down, and then you go in on the defensive. So, that timing. Or, you found a spreadsheet somebody left on the printer of everyone's salary. Or, you see one of your co-workers driving a really nice car to work. We all get signals about how fair we think our comp is. They're crazy.
Ideally, why we're doing this is, we're trying to help people not wait until they're upset to ask for a raise, or wait until they're super stressed out. Lee likes to say, sometimes the underlying message is, "You're not paying me enough to deal with this," and then figuring what that is. So, not when you're angry, is good timing. But that's when most people ask for raises, when they're angry.
Southwick: What if your role really hasn't changed in the last year? What if you're still doing the same things you were the previous year?
Chambers: That's a good question. Is that deliberate choice on your part, is that a circumstance that you've decided is OK? Maybe that's a good part of your conversation. If your role hasn't changed, why?
Then, you'll see, there are some market differences that happen for roles. Some roles are going to get more competitive, so the salaries are going up regardless. You can pay attention to that. But for a person who, their role hasn't changed, it's really thinking about if they can develop mastery within that role and continue to improve their comp; or, if they've topped out, that can also matter.
Burbage: It could be a deeper discussion, I think, than, "I want a raise." "OK, is it 3% or 4%?" A brass tacks sort of a discussion. It could be a development conversation. Where am I in my career? Where am I headed? What are my opportunities here at this company and in my role? It can be really powerful in understanding the trajectory that you're on beyond just compensation.
Southwick: We talked about how right now, the economy is really strong, unemployment rate is really low. Do you think that will have an impact? If your company is obviously making more money, they have more money to throw at you. I assume you should probably think about that, as well.
Chambers: Yeah. We talk about context a lot. That could be the macroeconomic context. It can also be, hopefully your company is doing some kind of communication about how the business is doing. If budgets are really tight within your company, it might not be the best time. What I'm helping people talk through is, is this about you or about your situation? What we're trying to push these conversations toward is the things that are about you, vs. the things that are about your circumstances. Everybody's circumstances are different.