Compound interest takes time to really get going so during the early days of your journey towards financial independence you're going to need to rely heavily on the amount of income you can make, save, and invest. But the thought of asking for a pay raise is daunting as you feel all the cards are held by your boss. What are some of the things you should keep in mind in that case, when you finally pluck up the courage to ask for more money?
You have much more control over getting a pay raise than you realise and the cards are certainly not all held by your boss. Any sensible company would want to keep their valuable employees and a part of achieving that is by paying them fairly. Therefore the key to getting a pay raise is by having the right types of conversations, making clear agreements on what actions you should take, and ultimately being able to demonstrate the value that you're adding to the company.
Know who you need to convince first
You may assume that the first person you need to convince that you're due a raise is your boss - but in truth they're the second person at the earliest. The first person is actually yourself.
If you yourself are not convinced then there's little to no chance that you're going to be able to put forward a compelling case on why a raise is deserved.
There are two sides of the picture when it comes to convincing yourself - the first is the professional side that involves the things you've worked on, and the second is a personal side.
Getting a good view of your achievements professionally is obvious - no company on the planet is going to randomly give you a raise if you haven't actually done anything of value. On a day to day basis it can be difficult to see the overall positive impact you are making for the company, but when you take the time to look at things as a whole it becomes clearer on if you're actually the superstar you think you are.
The personal side is just as important to understand because these represent the long term goals and aspirations you have in life. Be it getting on the property ladder or paying off your mortgage, starting a family with your partner, saving for a better retirement or anything else - these serve as your guiding purposes in continuing to wake up everyday and do what you do.
Without them - whatever they are - it's hard to see what you're actually working towards and why you need to extra money to do so. Remember, financial independence shouldn't be the end goal - it's just a part of the journey towards your own personal purpose in life.
Have a set of agreed career goals or objectives
The easiest way to put forward a case on why you deserve a raise is to be able to say "You set some goals for me and I've achieved them all".
The sole reason for a company to set objectives for their employees is so that they have a measurable way to determine if that employee is actually adding the value they're expected to, and if they're making progress in terms of their growth.
Thus, if you've achieved your goals you're able to demonstrate that you aren't simply clocking in and out each day without really getting much done, and it's the best starting point when you're putting together the list of your achievements in preparation for your conversation with your boss.
If you don't have any agreed objectives you need to get some as soon as possible - bring it up with your boss and tell them that you'd like to be able to demonstrate growth in the job, and you think the best way is by agreeing on some goals that can be periodically reviewed.
Remember to get something formally written up after you've set or discussed your goals, otherwise there'll be no record on what has actually been agreed.
If there are no such things as career goals and objectives where you work - then you know that it's unlikely to be a place that's well aligned for your growth or progress towards financial independence.
Don't be afraid of being vulnerable
Hollywood likes to paint this picture of the corporate boss who is some heartless monster that wants to squeeze every second of your life out of you for the sake of productivity.
While I'm sure that some people like this do exist, the reality in my opinion is that the majority are humans just like you and I.
Therefore I believe that opening up a little about your personal life and aspirations when you're having the conversation with your boss about a raise is a good thing, and can help swing the decision in your favour.
It doesn't really matter what your personal reasons and motivations are - since that's going to be different for everyone - but what you want your boss to see is that you're a person, and not just a number, who has personal aims outside of the workplace that are just as important as your professional goals.
One thing I'd warn against is trying to go down the path of a "sob story" however.
You're not trying to guilt trip your boss and they're never going to want to set a precedent where a few tears are enough to get more pay.
What you really want is to build a connection of mutual respect. Let them know that you're on their side and as long as you're being looked after, you'll do the same in return.
Don't drop a bomb
In keeping with the message of seeing each other as human beings, understand that your boss may not have the ability to immediately give you a conclusive answer to your request for a raise.
In fact, it could involve some internal processes that they would need to go through in order to gain approval and the sudden pressure from you to give an answer could send them into "fight or flight" mode.
Needless to say this could easily go against you.
Instead, give your boss a heads up that you intend to bring the topic up and would like to arrange a formal meeting to discuss and lay all the cards on the table. The best way to do this in my opinion is to send a simple e-mail to them saying that you'd like to arrange the meeting.
The e-mail should be clear that you intend to talk about a raise (don't beat around the bush), but it doesn't need to go into a whole lot of detail or backstory - leave that for the actual meeting. Also, provide some suggested dates and times for the meeting - give them about a week to prepare - rather than leaving the timelines completely open; this allows you to stay in control of the conversation and shows your intention of pushing it forward.
Giving your boss a heads up allows them a chance to digest the fact that you're requesting such a meeting and gives them time to gather the relevant information, or put together their own thoughts, so that they feel well prepared to have that conversation with you.
Again, this is so that they don't feel like you've cornered them and keeps the whole conversation meaningful and co-operative.
Know your approach to the conversation and be prepared
When the meeting happens you might feel that launching right into the list of your achievements is the best approach but in my opinion I think it's best to try and make the conversation more "natural" despite it being a formal meeting.
Try starting with a bit of small talk just to ease into the conversation and get the dialogue flowing. Ask your boss about something personal to them, such as their kids or family, or passion projects. You're trying to build a personal "bridge" in the conversation so that there's no "me versus you" atmosphere for the rest of the meeting.
Eventually you'll move onto talking about work - that's the purpose of your meeting after all - and you'll want to be able to put forward your case in a non-combative way. I've made this mistake before where I was almost accusatory when presenting my achievements - like I was owed something for sure.
There's no avoiding your own personal feelings and internal dialogue - I still have them too - but you want to be able to present your case without this tone to keep your boss "on side".
When it comes to presenting your achievements start with the agreed upon goals and objectives that have been set and agreed between the two of you. Present the evidence that completion criteria has been met and, if possible, show how there has been positive impacts after doing so.
Any "additional" responsibilities or work you've taken on - and completed - should only come after your own goals and objectives. This is because if you didn't do your objectives but worked on other unrelated things, your boss could turn around and say "... but that's not what you're here to do."
After talking about your work achievements - and had the back and forth with your boss - try to bring the conversation back into the personal space to finish off. Talk about your own aspirations and passions in life - remember the tip about being vulnerable - and why it motivates you to do better at work.
You want the last impression left on your boss to be your "human" side, rather than your "lists and statistics" side.
Know your number
Even if your boss hasn't agreed to giving you a raise yet, they may still ask you for an amount that you're hoping to receive. You need to know what that number is, and you need to be able to justify it to some extent.
Do a bit of market research before setting up your meeting so that you know what the typical salary is for someone of your level and experience. But also look at roles that are slightly more senior to understand how much of your "extra responsibilities" would fall into their job description.
You may not be doing everything that the more senior role is doing - so don't expect the exact same pay as them - but you're certainly taking some of it on and that should demonstrate a willingness to take your own career to the next level.
You should also factor in "organisation knowledge" - this is the inherent knowledge you have acquired as a member of the company. You know their processes, their systems, the interactions between different people and groups, plus the history of various projects or items of work.
This isn't something that a new employee of "equal skill and experience" would have over you and is something you can point out when putting forward your number.
If you feel you've done the "extra" and have the "knowledge" as I've described, don't be afraid of asking for an amount that is higher than the "market average". It's better to let the company come back to your with a counter-offer if they feel it's too high, than you lowballing yourself right from the very start.
Take pride in your own value and always remember that you can get the market average at any other company.
Don't get offended; get the reasons
There's never a guarantee that you'll get a raise even if you put forward a good case that's backed with evidence, and even if your boss agrees that you've put in the work and have done the extra.
Alternatively you may have been offered a raise but it's less than what you were hoping for, and you're not entirely satisfied with the result.
If this happens don't take it personally or get offended, and don't start threatening to walk away from your job - just yet.
Instead ask for feedback so that you can better understand the reasons. Remember that asking for a raise doesn't have to be a "me versus you" situation and the way you conduct yourself in these conversations will weigh heavily on the eventual outcome.
It's best to show you're willing to continue to commit to the company provided that they're transparent with you on how you're able to make progress - and that you're actually able to make that progress to get the result that you want.
Use what you learn from the feedback and give yourself a bit of time to digest it before making your next move.
You're not going to take the result laying down but you need to be strategic if you're going to get that raise that helps you towards financial independence.
Revisit in a few months
After you've received your answer from your boss and have had a chance to gather feedback on how the company arrived at its eventual position, ask if the topic can be revisited in a few months; something like 3 to 6 months time.
Make sure to get it booked into the diary for you and your boss.
This sets a real deadline for you both so that the topic doesn't just float into the background where it's convenient for everyone to "avoid".
Regardless of if you got no raise, or if you got a raise but it was less than what you asked for, you want to get to a point where you can state: "So if I do X, Y, and Z will the company give me the raise I asked for?"
This makes the conditions absolutely clear in that there are certain things that need to be achieved, and if they are achieved there's no arguing against the fact that you've earned your raise.
It also means that you must insist on a clear answer from your boss.
Don't accept an answer that sounds like: "let's see where we're at in a few months time" - because you're not actually able to take action on anything with that sort of response.
Make this clear and say that if you're going to accept that there's not going to be a raise, this time around, then there needs to be a clear set of things that you should focus on in order to change that result.
When the conditions have been agreed - focus every moment of your effort on working towards them.
Always get written proof
Getting something written up after an agreement has been made is paramount to protecting yourself when it comes to anything in the work place. It may feel very formal, and like you don't trust your boss, but you need to know you'll have something to fall back on should the need ever arise.
After all, you wouldn't show up to work if you never received an employment contract that was signed, so the same applies to your agreements be it a raise or a set of actions that will lead to a raise if completed.
The format of this written proof can vary but you want it to be auditable and via accepted communications channels. An actual document that has been signed by yourself and your boss, then scanned, and is confirmed by someone from HR would work - or it could be an e-mail you receive from your boss via their official business e-mail address.
If anything comes via an unofficial channel or via a method that you're unsure of, get some verification from another party of authority, i.e. someone from HR. If it turns out that the method isn't recognised or acceptable, ask your boss to resend it through the proper means.
From your side you should always check that the written proof clearly states the conditions and criteria - get clarity if anything seems ambiguous - and you should give a recognise response through proper channels to show that you've accepted.
While the written proof may not be considered a binding contract or anything of that sort - it would really depend - it's at least something that you could officially point back to if there's ever a dispute or disagreement later on.
Be prepared to walk
First and foremost if you've honoured your end of the agreement and the boss won't honour theirs, it's time to leave - no questions about it and I have very little more to say on that matter. But this a very specific scenario and there are others that may make you consider moving on.
While I firmly believe that you should never use the threat of walking away as leverage to get a pay raise - think of your reputation and relationships after you've taken this approach - you should be prepared to walk away under some circumstances.
As someone with their own personal financial goals, such as working towards financial independence, you want to know that you're working at a company that can help facilitate that. The progress should be mutual - you help the company move towards it's goals while it in return should do the same for you.
However if there isn't a clear path to your progress and success, despite your own efforts to show your willingness to work towards it, then you need to consider if it's worth you sticking around much longer.
Commitment to a company is always a good thing but you need to be committed to yourself also. There's nothing wrong with taking a look at other opportunities out there to see if they are more aligned with your own financial goals.
If you manage to find something and you decide to walk away from your current company, never accept a counter offer - if they try to offer one - even if the money is better than at the new company you've found.
If your company is able to make such an offer then they should've done so in the first place when there still wasn't a threat of you leaving. By doing so only after you've found somewhere new, it shows that the respect for you and your financial goals simply wasn't there and probably won't be in the future either.
My journey towards financial independence started slowly - as it does for anyone else - so initially my ability to grow my wealth largely came from what I was able to earn and save rather than the compound interest from my passive investments.
I consider myself quite fortunate in that I've worked with a number of different bosses who have been very supportive of my personal development. Over the years they have guided me and even coached me somewhat when it comes to "asking for a raise".
From those experiences and through my own pondering I have arrived at this short list of tips that I still employ to this day when it comes to increasing my earning power in the workplace.
Sometimes the thought of asking for a pay raise is daunting as you feel all the cards are held by your boss - but when you realise this isn't actually the case and that you have much more power than you initially thought, it becomes much easier to take control of your own career and push it forward towards meeting your personal financial goals.