Dave Says: Consider your value to employer when negotiating a salary

Dear Dave,

I’ve accepted a promotion that would take me from an hourly wage to a salaried position. Do you have any advice for negotiating a salary?

J

Dear J,

The quick and simple answer to this question is you negotiate it based on what you’re worth to the company. Now, how do you figure that out?

There are a couple of measuring sticks you can use. One is associated with the revenue you bring in, and that’s a nice, concrete reference. Another thing you can do is research some of the more reputable career websites and develop a compensation study based on comparable positions in your area.

If you’re a valuable team member of mine who’s moving from hourly to salary, it wouldn’t be a “negotiation” — it would be a discussion. Honestly, most positions are priced initially at the amount you can be replaced for in the new role. In other words, what’s the going rate for someone in your position?

If it were me, I’d produce two or three well-researched compensation studies. Give them to your bosses, and talk it through with them. Depending on the size of the company, they may not have done that much work figuring it out themselves.

It’s kind of like deciding what to ask for when you sell a car. You try to appraise it for what it’s worth in the marketplace to other people. That’s the way you have a discussion. It’s not that you’re telling them what to do or presenting an ultimatum, you’re asking questions and presenting information. If someone did that in my office with a respectful and professional manner, it would go a long way.

—Dave

Hands off the emergency fund!

Dear Dave,

Sometimes our budget gets busted because of home improvements and various other things. I think we should take money from our emergency fund when this happens, but my wife says it should come out of our restaurant or fun money. What’s your opinion?

Josh

Dear Josh,

Overspending isn’t an emergency. If you budget a set amount in one category, and you go over that amount, you’ve got to reduce something in another area to stay within your budget for the month.

If something happens on a pretty regular basis, it’s not an emergency, it’s a predictable event. That means you need to budget a larger amount for home improvements or whatever the problem area may be.

On a month-to-month basis, if you have $200 budgeted for household repairs, and any work turns out to be $300, I’d rather you cut back on eating out or another non-essential category to make up the difference.

Your wife is right on this one!

—Dave

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

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