Posted September 23, 2013 by

4 Reasons You Should Negotiate a Raise (But Never Spend the Money)

Jim Hopkinson

Jim Hopkinson, Salary.com contributing writer

When asking for a raise or promotion, many people ask the wrong way and ask for the wrong reasons.

The wrong way to ask is to walk into your boss’ office and beg for a raise, demand a raise, or give an ultimatum. The wrong reasons to justify an increase are excuses like you need the money for rent, you heard that a friend of yours makes more than you, or you want to buy that new Jaguar convertible you saw on TV.

In fact, if you’re like many Americans, even if you get that raise, you’ve already spent the additional money before it even clears direct deposit.  According to a CNN/Money survey, 76% of Americans are living paycheck to paycheck, 50% have less than a three-month cushion, and 27% had no savings at all.

Here are 4 benefits of negotiating a huge raise – and then not spending it.

4. Increased Focus

Lets say you hit the one year mark in your new job, you’ve worked incredibly hard to prove yourself, and then during your annual review you do your homework, present your case, and land a nice raise.

Like a sophomore that has survived freshman year and now knows their way around campus and how hard they have to work to succeed, an employee that is confident that they are fairly paid in the marketplace and happy with their role can put more focus into their job.

Ironically, when you’re not constantly worried about the paycheck of the guy sitting next to you or if the grass is greener at another company, you’ll be more focused on the goals in front of you, which should lead to a better raise at your next review.

3. More Savings = Less Stress

Most financial planners advise having an emergency fund of 6 to 12 months of living expenses you can access in a worst-case scenario. If you’re able to use the money negotiated from a raise to build up this nest egg, it can have several benefits.

If there is an unexpected layoff, restructuring, or an event that eliminates your job, it won’t be the end of the world if you have that buffer. Just knowing it’s there might lessen some of the stress in your life.

Additionally, the problem with living paycheck to paycheck is that you get in the situation where you NEED your job. And when that happens, you lose a key negotiation point: leverage. Your boss could be a jerk or you may dread going to the office every morning, but if you’re 100% reliant on that paycheck, there’s not much you can do. You can’t leave.  Continue reading . . .

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