A few weeks ago, I had the opportunity to speak to students about personal finances. This week I met with a few soon-to-be graduates to review their offer letters and how best to take advantage of them. Many of these students had already accepted their offers, but one still had time to negotiate. In this post, I will cover the components of an offer letter and how best to take advantage of it on the path to financial independence. It’s critical and quite crucial to take steps as early as the time you accept your first full-time job offer to set yourself up for success when it comes to money.
Base Salary
A lot of people automatically focus on the base number salary when the offer letter comes in, but this is just one component of the entire package. So while it’s important to review the base salary based on your personal financial requirements, it’s also important to look at the amount in terms of industry average for the area where you live, the actual job title and description and against all other benefits that are being offered. The base salary is what you will live off of so it’s important this is inline with that you are expecting and deserve. This number is totally negotiable. Many companies have a range budgeted for the salary they are willing to compensate, the key is to try to gauge what that range is and get to the upper range as much as you can.
If you are going to negotiate, which you should always do, make sure to reiterate why you would be valuable to XYZ Firm and why you deserve the few thousand dollars more in pay. Many people, especially those that are not familiar with asking for more just ask for money without justifying it. Sorry, that won’t cut it. Prove to the company once more that hiring you for a few more dollars is the right decision. Many companies will not want to go back to the drawing board for a candidate search because it costs time and money so it’s critical that you show your worth and potential even before you step foot in the door.
In the case of the soon-to-be graduate who received an offer letter last week, a strongly worded email requesting an increase was sent. Before stating the number that he required, he summarized why he would be a good fit for the company and other skills he had learned since the interview process to show them that he is not only fit for the current job, but could offer the company other expertise outside of the job description. He ended up receiving a counter-offer a few hours later.
Benefits
I love reading benefits packages because they are so many hidden gems and potential for more money in there. You may not realize it but each perk a company has is technically part of your compensation. When management gathers at the end of the year, they analyze all of the costs and benefits to providing certain perks to employees. Knowing the benefits that your current company offers can also be used as negotiating points for future job moves. If Company X has Benefit A and you want it it at Company Y, bring it up and see if you can get that perk also.
A common benefit is the retirement benefit or a 401(k) plan. Note the company match and the vesting period. On your first day of work, make sure to sign-up for this immediately. Most retirement plans do not automatically sign up new employees so you have to be proactive and take advantage of this right away. The 401(k)match is part of your compensation so it behooves you to take advantage of “free money” right away. It’s also important to do this right away so that you get use to that paycheck deduction. If you don’t see the money hitting your checking account, it is unlikely you will miss it and more importantly, you’ll have the opportunity to have it grow much earlier.
Review your health benefits closely. Sometimes, you may not need the most comprehensive package especially if you are young and healthy. It might be worthwhile to enroll in a high-deductible plan with an HSA option. This allows you to set aside money for future medical expenses. A tip is to save money as part of a planned savings strategy for medical and dental so that you aren’t surprised by the high-deductible plan.
Check for other benefits as well including tuition reimbursem*nt, access to financial advisors or law professionals at discounts, commuting and transit benefits, insurance, employee profit sharing, etc. These benefits cost money and if you can take advantage of them instead of shelling out your hard earned money, then by all means do it.
I know the Benefits book can be daunting and boring, but it could have a few more perks to help you build a sizeable nest egg early.
Check out our video below talking about all the ways you can and should maximize your employee benefits.
