How can you earn significantly more money starting right now?
Changing jobs and negotiating a higher salary is a great way to boost your lifetime earnings. If you’ve been at a job for a while, and your salary has stagnated, you can probably get a big bump by starting over at a new company, and resetting your base salary so it’s something closer to “market”.
In his excellent article, The Ultimate Guide To Salary Negotiation For Software Developers, John shows the difference in salary over 10 years when you negotiate your starting salary to be $90,000 instead of settling for $80,000. He does a great job of showing how much more you’ll earn when you start at $90,000 if you get a 3% raise each year.
Making that leap to a new job and negotiating your starting salary effectively can earn you hundreds of thousands, or even a million dollars more over the course of your career.
So there’s a lot to be gained by changing jobs, but there are costs as well. You might have to move your family to a new city, learn new technology, or leave a team you really like working with.
What if you’re not ready to make that big of a change? Can you earn more by staying put?
Here’s a table from John’s article. I’ve added two columns to his table showing what happens if you negotiate an additional 5% raise every two years in both scenarios. 5% every two years is a very conservative estimate of what is achievable for most software developers.
|3% raise each year||5% MORE every other year|
What do we see here? Three interesting things.
1. Even if you didn’t negotiate your starting salary at your current job, you have options
Let’s say you changed jobs, didn’t negotiate your starting salary, and started at $80,000. Then you found out how powerful negotiating can be, and realized you probably could’ve negotiated for a starting salary of $90,000. You like your job, but now you feel like you’re underpaid. What can you do?
The good news is you can stay at the job you like and make up that lost ground by negotiating a 5% raise every two years. Look at Year 6 in the table above. If you started at $80,000 and negotiated a 5% raise every two years on top of the 3% you’d probably get anyway, you’re making more than if you had started at $90,000 and gotten the standard 3% raise every year.
So if you’re at a job you like and you didn’t negotiate the best starting salary, you can make up ground by negotiating a raise every couple of years.
2. If you have to choose a raise or a job change, raises can beat higher starting salaries
Take a look at the first three columns in our table. It’s obvious that you’re much better off negotiating a starting salary of $90,000 instead of $80,000. But look what happens when you compare a $90,000 starting salary with 3% raises each year to an $80,000 starting salary with an additional 5% raise every two years.
You can make more by pursuing a 5% raise every other year than if you just negotiate your starting salary!
So if you had to pick one—a higher starting salary, or a higher-than-usual raise every couple years—you would be better off getting a bigger raise every couple years.
3. You don’t have to choose!
But here’s the best news of all: You don’t have to choose! You can double-dip by negotiating your starting salary and negotiating moderate raises every couple of years!
And look what happens when you do: You make a lot more money over time.
Have another look at the table above. The worst-case scenario is you didn’t negotiate your starting salary and you just accept the 3% raise you’ll get every year. The best-case scenario is that you negotiate your starting salary up to $90,000 and you negotiate an additional 5% raise every two years. In the best-case scenario, you make $250,000 more than in the worst-case scenario!
Add more value, make more money
I know what you’re thinking. “Sounds great! But it’s easy to say, ‘Get a 5% raise every two years!’ How do I actually do that?” Here’s the short answer:
Bring more value to the company than what’s expected of you. Then ask to be compensated for it.
If you want to make more than your current salary, you need to bring more value than was expected of you when your salary was set. The company’s goal is to make money, so you add more value by helping the company make money.
“But I’m a software developer. I don’t have anything to do with sales! How am I supposed to do that?”
Yes, generating revenue is one way to help the company make more money, and you’re right that writing software often doesn’t directly correlate to revenue. But “generate revenue” is only one of three ways you can help the company make money.
Here are the three main ways you can add value to your company: drive revenue, reduce costs, reduce cycle time. If you focus on activities that do one or more of those, you’ll add value to your company.
Stop right here and think of ways you could drive more revenue, reduce costs, or reduce cycle time on your projects.
Got some ideas? Here are a few I came up with:
- Write more code (cost reduction)
- Manage more projects or bigger projects (more revenue and cost reduction)
- Fix more bugs (cost and cycle time reduction)
- Train new co-workers (cost and cycle time reduction)
- Mentor junior developers (cycle time reduction)
- Take some weekly status reports off of your manager’s plate (cost reduction)
So most of the ways you will add value are not revenue generating, but that’s ok because they’re still valuable!
That list above should give you some ideas where you can focus on adding more value to the company. But if you can’t think of anything, you can always ask your manager to help you out. “I would like to take on more responsibility and add more value. What else can I do?”
Let’s dig into “Write more code”
“It’s easy for you to say I should write more code, but I’m already working full-time. How am I supposed to that?”
It’s a good question, so let’s go deeper on that one and hopefully you’ll get some ideas you can use to go deeper on that entire list.
The obvious way to write more code is to work more hours. That would probably make you more valuable to your company, but it’s not what I have in mind. Instead, look at “code” as something more than lines of code. Think of it as a tool to help do something. Instead of “write more code”, we could say “build more tools”.
That’s something you can probably do without working more hours. How? The obvious way is to get more efficient through practice and code reviews. If you’re more efficient, you can write more code in the same amount of time.
Or what about learning a new part of the stack? If you mostly work on front-end code, instead of learning that new JS library, you could start learning the back-end part of your company’s stack so you can work faster with fewer handoffs to other developers on your team.
Here’s how you might describe the value you add by writing more code:
“I started doing code reviews with Sara, and my code has gotten a lot better. I’m moving faster and bumping into fewer bugs. I also started working on the Ruby on Rails part of our stack so I can integrate our Angular code faster.”
Want more ways to be more efficient and write better code? The MoneyCode series has you covered!
Write more code. Add more value. Make more money.
In that context, getting a 5% raise every two years is very doable. Just look at all the value you can add with just one item on that list.
As you get more experience, some of these things will happen naturally. For example, you’ll often be given more projects over time, and that makes you more valuable. You might help train new co-workers as they’re hired, and that makes you more valuable.
Keep track of your progress over time
As you take on more responsibility and add more value, make sure you keep track of your goals and progress. This email template is a great tool to keep track of your accomplishments, social proof, and even your salary goal.
What are you aiming for? What have you done to add value to your company? What awards or other recognition have you gotten? All of those things can help you build your case so it’s easier for your manager to say yes.
All you’re doing is proactively talking to your manager every two years to make sure your salary is adjusted to reflect the additional value you’re bringing to your role since your last salary was set.
So keep track of the ways you grow and add value. Keep track of your salary increases. When your salary is lagging behind your value, it’s time to ask for a raise. Do that consistently, and you’ll make a lot more money over your career.
How do you know if you’re you ready to ask for a raise? Learn more about when and how to ask for a raise with my free email course.