Ok, so you probably doubt that I can deliver on my headline. Well doubt no longer. Consider the two steps needed to earn $1.4 million more over your career than those who don't do these things:
1. Get a college degree.
2. Negotiate a higher starting salary.
Let's take these one at a time. Here are some recent findings on the value of a college degree:
A new report from the San Francisco Fed crunched some numbers. The takeaways?
College graduates—those with a four-year degree—earned about 61% more ($20,050) annually than those without a four-year degree in 2011. The premium has averaged around $20,000 for decades.
If we conservatively assume that the annual premium stays around $28,650, which is the premium 20 years after high school graduation for graduates in the 1990s–2000s, and accrues until the Social Security normal retirement age of 67, the college graduate would have made about $830,800 more than the high school graduate.
I'll add some comments on this in a minute. For now, let's skip to the value of negotiating a higher starting salary:
According to the study, which will soon be published in the Journal of Organizational Behavior, the compounding effect of successful salary negotiation can be significant. Assuming an average annual pay increase of five percent, an employee whose starting annual salary was $55,000 rather than $50,000 would earn an additional $600,000+ over the course of a 40-year career.
This latter study even tells how to negotiate:
Five negotiation strategies were examined in the study: Accommodating, Avoiding, Collaborating, Competing and Compromising. Individuals who negotiated by using the Collaborating and Competing strategies—utilizing open discussion of issues and perspectives—showed the best results. In contrast, those who used the Avoiding, Accommodating and Compromising approaches were less successful in negotiating larger salaries.
Now let's do some math. $830,800 for going to college plus $600,000 for negotiating a higher starting salary equals $1,430,800! See, and you doubted me!!!! :)
Ok, so I'm writing this a bit tongue-in-cheek. There are a gazillion "yeah but what about this" issues. The college you go to, how much you pay, what you major in, and on and on.
And these are valid issues that can impact the value of each of the suggestions.
But it's also true that if you do certain things, you will earn more money over the course of your working career. And two of those things (on average) are getting a college degree and negotiating a starting salary.
Maybe not $1.4 million worth, but certainly a substantial amount, right?
What's your take on the issue?