Negotiating your salary is never an easy conversation. If you’re confident in the experience and skills you bring to the table you can negotiate a high salary. However there are some expenses that can eat away at your paycheck before you ever see it.
On that note here are five expenses to keep in mind when negotiating a salary:
Taxes
One of the biggest cuts that will come out of your paycheck is income tax.
Recent data released by the IRS shows that the average American pays about $15,000 in income tax. Depending on your tax bracket you are going to be paying 10-37% of your income as tax.
For instance if your salary is $30,000 and you fall into the 20% tax bracket your income after tax would be $24,000. That’s a huge chunk of your salary gone.
When negotiating your salary you should consider how much you will have to pay as income tax, as what you have after tax is what you can consider your disposable income disposable income.
Debt Payments
Many Americans have debt of different kinds from credit card debt to auto loans, student loans, mortgage and personal loans. Some are even struggling to pay off their debts and are looking for ways to refinance student loans.
When negotiating your salary you should calculate how much you’ll have to allocate towards paying your debts.
If you know how much you’ll need to allocate towards your monthly debt repayments it gives you a better perspective while negotiating your salary.
Retirement Savings
Everyone wants to retire early, and spend the rest of their lives with family, traveling the world or chasing a hobby, however, doing so involves proper planning ahead of retirement.
There are different retirement plans you can consider based on your current income – but the general rule revolves around saving 10-15% of your income towards retirement.
You can also consider setting up a pension fund for yourself as this helps your retirement plans. Factoring in your retirement plans would help you know what salary works for you.
Insurance
Whether car insurance, health insurance or life insurance – everyone including small businesses have insurance plans because it protects them from unexpected expenses.
For instance, let’s assume your kindergartener breaks an arm on the playground – instead of paying outrageous medical bills you can simply rely on your health insurance to cover all or at least most of the cost.
Insurance is a way of avoiding unexpected expenses. It’s important to calculate how much you spend on premiums and factor that into your salary negotiations.
Cost Of Living
Cost of living refers to how much you spend on housing, feeding and other expenses that you may incur on a daily basis; it even includes how much you spend at starbucks.
Cost of living is relative to the area where you live. For instance If you reside in a major city, your cost of living will be higher than those living in a rural area.
Your cost of living is also determined by the number of dependents you have, the more mouths you have to feed the more you need to spend.
When negotiating your salary you have to calculate your cost of living and use it as a gauge hand-in-hand with other expenses to determine your salary.
A proper understanding of your expenses puts you in a good place to negotiate your salary and get a figure that will make you happy and give you a comfortable life.
