6 things to do when negotiating your salary
In the business of financial planning and wealth management, there is naturally much attention placed on investment strategy and how to grow or maintain financial security by selecting the right mix of stocks, bonds, real estate and the like.
More importantly, there are many habits, beliefs and behaviors that have more to do with personal financial success than investing in just the right business or outsmarting someone else to gain an edge.
In my experience working with people over the past decade plus, whether you are a teacher, an airline pilot or a small business owner, there are characteristics or a mindset that can make a meaningful difference. There are varying levels of wealth, and everyone has a different definition of what financial security means to them. But, at the core, regardless of career income, the following attributes are the critical functions of being financially successful.
Act like the CEO of You, Inc.
Your income might be the result of working for someone else, but you are the executive (or co-executive in many cases) of your family’s financial security. Work to make decisions that are most likely to be personally profitable so that you can stay in business and grow your business over time. Treat yourself and your family as the shareholders in You, Inc. and do everything you can to act in the best interest of shareholders for a compelling balance of life experience and financial flexibility.
Pay yourself first
Before you think about your spending capacity, set aside money for your future. If you wait until you cover your expenses and then pay yourself with what is left over, you’ll likely experience lifestyle creep and have less and less to save and invest over time. Put your future at the front of the budget. The higher savings rate you have, the less reliance you will have on unpredictable investment markets to do the heavy lifting to build financial security.
The earlier you start saving and investing, the longer your money has to build upon itself. There can be a snowball effect from re-investing dividends, interest income and capital gains that causes later-in-life gains from a larger base to dwarf early growth.
Think of money as a tool
Money is a resource to help you construct life experiences. Good financial habits can allow that tool to become multi-faceted. It’s better to own a Leatherman than just a screwdriver.
Trust process over outcome
Focus on a sound process for how to invest. Be patient and disciplined when the outcome has not met your expectations over the short term. Understand that some outcomes are driven as much by luck as skill, but that over time, the impact of a disciplined process is likely to outweigh the impact of luck.
Think ahead. Ask “what if” questions and consider a variety of different paths to your life goals, important milestones and options for how to spend or save. It’s the proactive planning that can help you stick with a trusted process when stress is put on your financial life.
Be risk aware
Whether it is a career decision, an investment opportunity or some other choice in life, there is a range of potential outcomes on a wide risk-reward spectrum. Think about the probability that something could have an undesirable conclusion and what that would mean to you. Try to figure out when the likelihood of a rewarding outcome is worth accepting some risk.
Know who gets a share of your money
Understand how all taxes work (income, sales, property, etc.). You can only spend after-tax money. Be as tax-efficient as possible. This will make your after-tax money go farther. Your true wealth is net of taxes, inflation and other drags on the value of what you own and earn, not the gross amount.
Understand impulses, biases and reactions
Money and its intersection with life, family and business come with psychology and emotion. Your behavior and decision making are important and often need to be at their best when they are challenged the most.
Appreciate over depreciate
Emphasize spending on things that can be expected to grow in value over things that decline in value. It’s better to have a nice house and an old vehicle than the opposite. Be a curious, life-long learner willing to pay for education or training if it will help you grow personally and professionally.
Surround yourself with a quality team
Recognize where you are not an expert or don’t have the time or interest to become one. Work with someone to coach you and deliver a professional level of collaboration where you most need it. Find people who will challenge you to think, plan, and grow — people who can accelerate your success.