Money

Personal finance expert: Try these 5 negotiation tips to score a $5,000 raise

Why this entrepreneur takes Wednesdays off -- and how it's made him millions

There are a few big wins in life where — if you simply get them right — you can grow your wealth by hundreds of thousands of dollars over your lifetime. As a result, you'll never have to worry about minutiae like "Can I afford this appetizer?" or "Should I spend $2.50 on this mocha?"

Big wins take just a few hours to do and pay you back for the rest of your life.

My team and I have spent the last 10 years searching for these big wins, testing which ones actually work, and teaching them to tens of thousands of students in my courses and to millions of readers on my blog.

The best big win for increasing your income is asking for a raise.

A one-time salary increase of $5,000 — properly invested — adds up to over $1,300,000 by the time you retire. If you don't believe me, just check out this salary calculator to see the difference that one-time pay increase makes over your career.

How many lattes is that worth? Talk about a big win.

You don't need tired hacks. You don't need feel-good motivational speeches. Yes, we hear woo-woo statements like, "Be yourself!" And we see blog posts that tell us, "Wear your best outfit and smile." No! In this article, I give you five tactics with step-by-step advice and word-by-word scripts that are proven to make your boss loosen the purse strings.

1. Show how you can solve your business' problems with the briefcase technique

It's easy to tell your boss you've done great work and that you deserve a raise.

But when you actually prove it – and explain how your work translates into more profit or savings for the company – you'll instantly grab your boss' attention.

The secret is show, don't tell.

The briefcase technique is an advanced strategy that has helped students negotiate and earn thousands of dollars in raises.

With this technique, you literally open your briefcase and give a document to your boss with a clear and compelling rationale for why you deserve a raise. It should show that:

  • You've been blowing things out of the water with your performance.
  • You understand your boss' and the business' problems.
  • You have a plan to solve those problems through your role in the company.

2. Use comparables to justify a higher salary

Having comparables quickly gets you and your boss on the same page of what your salary range should be.

The ideal is to have multiple real offers on the table that offer a higher salary. The next best option is to find comparable salary ranges for your industry, location, and business type using Payscale.com, Salary.com and Glassdoor.com.

Here's a script from a role play that I did with a master negotiator:

"Given the success I've been able to have in prior roles, which I believe I will bring to this role as well, I believe I deserve to be at the higher end of that $45,000 - $65,000 range."

3. Prepare your boss to give you a raise in six months

"If my boss thinks I deserve a raise, he'll offer it to me without me asking."

Wrong!

Here's the brutal truth: Even if your boss appreciates you, he won't pay you more unless you ask. After all, would you pay $110 for something with a $100 price tag?

Rather than waiting and praying, you need to let your boss know that you want a raise and pre-agree on what criteria you need to hit in order for that to happen.

Before asking, set the right tone. You need to connect with your boss emotionally and make sure the tenor is nice and relaxed. The last thing you want is a defensiveness.

Once your boss has agreed to review your salary in six months, you want to agree on an ultra-specific goal. Not things like improve morale or improve customer service. No! Ask specific questions like, "What numbers do I need to hit?" Once you agree on a number, get it in writing.

Next, you need to show that you're working toward that number and executing. Knock it out of the park!

Finally, circle back in six months – after you've blown past the numbers – and say, "You said it would take X to get a raise. I've done X and more. I'd like to have a discussion with you about that raise."

4. Know exactly how you'll respond if your boss objects

Before you offer rebuttals, show gratitude for the offer and reiterate your excitement for the opportunity. This will make the conversation collaborative rather than adversarial. Then, use one of the scripts below:

Objection: We don't have the money

Your response: Focus on the value you bring to the business, no the cost of your salary increase.

Objection: Here's a small raise (lower than you want).

Your response: Bring up other forms of compensation (i.e., stock options, additional vacation days, bonuses).

5. Know what salary you want

If you walk into a salary negotiation without a number, you're at the mercy of an experienced hiring manager who will simply control the conversation. That's what they do.

When you know what you want, not only can you communicate that crisply to the other person, you can demonstrate why — and this forces you to prepare for the negotiation. This single distinction can be worth thousands to you.

Finally, practice!

Most Americans are terrible at negotiating because they avoid it at all cost. Most would rather pay more rather than feel "weird" while negotiating.

That's why Saturn was around for so long. One of the reasons Americans loved Saturn cars was the "no-haggle" policy — which, to an Indian like me, is code for "let's charge these suckers more because they're afraid of negotiating."

It's no wonder that most raise conversations go something like this:

Us: "It's been awhile since I got more money, and I think I deserve to get a raise. Is that something you can do?"

Boss: "There's no room in the budget for that. Maybe next year."

Us: "Oh, okay. Thank you."

If you actually spend a few hours practicing, two things will happen. You'll be more comfortable, and you'll have a huge advantage with your salary negotiation. The best way to practice is role playing with a competent negotiator.

To see what this actually looks like, watch this 14-minute in-depth video to see how a master negotiator responds to tough objections:

Want more word-for-word scripts, ways to counter objections, and tactics to avoid confrontation? As a resource for you, my team and I created an even more in-depth Ultimate Guide to Getting a Raise and Boosting Your Income.

Ramit Sethi is the New York Times bestselling author of I Will Teach You To Be Rich and writes for over 1 million monthly readers on iwillteachyoutoberich.com, where he covers topics like psychology, personal finance, and careers. Fortune Magazine recently called him the "new finance guru on the block."