Should I mention the cost of financial goals when negotiating salary?

Question

In the past, I've received some salary offers that I felt were too low for my experience, my skill set, but also simply too low for possibly achieving basic life goals in the region of the job.

A classic example is owning a home. I'm not talking about owning a mansion, or living in a high-rise on 5th Avenue. I'm talking about the reasonable goal of modest home ownership in a location that doesn't require an onerous commute to your job.

Much has been written about the middle class wage stagnation and so on. I don't want to get into a debate about it. But it does seem to me that there has been a decoupling of salary levels and the prices of the basic things those salaries should afford.

Another way to put it: If the cost of living in some region is so high that the salary offered by a job cannot afford a savings rate high enough to ever feasibly save to buy a home, what should an employee do? Suppose that moving away and/or renting forever are not options.

My question is whether it is acceptable to bring these things up in a salary negotiation. If they say:

"We really can't offer you more than $X"

Is it acceptable to come back and say:

"Well, after doing research on the cost of living in the area, the average price of homes, and the competitiveness of the home market, I just don't see how I'll ever be able to afford to buy a house with a salary of $X."

Or is this unprofessional?

I know they are still free to stick to their offer and it might just be true that no employment agreement can be reached between the two parties. But I'm also worried that it will be seen in an unprofessional manner, along the lines of this:

"Your personal financial goals are your business. We are just telling you what the realities are for our job offer. It's not our job to service your financial goals."

I find a response like this extremely disingenuous, since you can only believe it's reasonable if you accept certain other things like:

1. Wanting a modest house in the region is too much to ask and you should stop wanting it.
2. Employers do not have to make a good-faith attempt to price their job offers competitively with regard to the actual cost of living, rather only competitively with regard to what other employers are doing.

Both of which are unacceptable points of view to me, in a normative sense (as in, even if you like free markets, point 2 above is purely value-destructive to society, not to mention individual workers).

Answer 1

Once there is an agreement that you would like to work for the company at the right price, and the company would like to hire you for the right price, it is entirely professional to maximise the money that you are going to receive for your work. That is entirely professional, and anything you do to increase that number (other than blatant lying) is professional.

You are in a slightly better negotiation position, because it's not your interest vs. the company's interest, it's your interest against the interest of the person negotiating with you. If you manage to get $1,000 more, the negotiator doesn't lose $1,000. They may have the slight inconvenience of getting closer to their budget limits, but it's not their money.

If you say that you want more, and you can give a good reason why you want more, and the negotiator feels that you might walk away if you don't get what you want, and the negotiator's cost of not hiring someone is higher than the cost of giving you the money, this might well work. It's a better position than having pulled a random number out of your hat and trying to get that amount.

And it would be a quite hard-nosed negotiator who says to your face "I don't think anyone doing this job deserves to live in a nice house. " Telling you that by working for them you won't be able to achieve quite reasonable personal goals is hard.

Answer 2

Should I mention the cost of financial goals when negotiating salary?

No.

Your personal financial goals are of utmost important to you, but of little interest to your employer.

In general, your employer wants you to be "happy enough" with your job and with your compensation. Employers generally work hard to determine what a competitive offer for a given position in a given locale must be, and they factor that into their offer. That way, they are in a position to attract and retain the kind of workforce they seek.

While it's possible you might get more solely because you have decided that you "need more", it's rather unlikely that an employer would stray far from its hiring and salary guidelines based on the particular needs of an individual.

Unless you have a unique talent or are in a strong buyers' market for individuals, you are not likely to get more due to your financial goals. It puts you in an awkward position to even bring it up.

A few other things to consider...

If you bring your personal financial goals up, you start down the path of making yourself seem "high maintenance". Employers don't want to have to worry about their employees' financial difficulties. What if your financial goals change later - will you demand more (or perhaps accept less)?

If you were to go the route of asking for more because you just don't see how you'll "ever be able to afford to buy a house with a salary of $X." you immediately open yourself up to a response indicating all the people who are happy living in apartments, or who have indeed managed to purchase a home (although perhaps not the kind of home you have in mind). Or you might be drawn into a discussion about how someone your age should wait before buying a house anyway. That's not a discussion worth pursuing with a potential employer.

If employers adjusted salary offers based on individual financial goals, would you be willing to accept less because you live in a less expensive part of town than some others? Or would you accept less because you don't have any children while Bob has seven and has a personal goal of sending them all to expensive boarding schools? What about Nick who has a personal financial goal of purchasing huge tracts of land? Or would you accept less than me because my personal financial goal is to retire at 45?

If you are the employer, should you now only consider potential employees who already have a house? If you were rejected by such an employer solely because you don't already have a house, would that be okay?

I find a response like [It's not our job to service your financial goals] this extremely disingenuous, since you can only believe it's reasonable if you accept certain other things like

1. wanting a modest house in the region is too much to ask and you should stop wanting it.
2. employers do not have to make a good-faith attempt to price their job offers competitively with regard to the actual cost of living, rather only competitively with regard to what other employers are doing.

Both of which are unacceptable points of view to me, in a normative sense (as in, even if you like free markets, point 2 above is purely value-destructive to society, not to mention individual workers).

I think you are setting up a false dilemma here.

Employers set salaries based on market conditions and value to the company. Locale plays a part in it (and there's a small sliver of "cost of homes in the area" there), competitors' wages play a part in it, local laws have a part, etc.

But the biggest part of a salary is based on the value to the company.

While I don't think it's a good path to follow, these are your interviews, so you can bring up any subject during salary negotiations that you like. Your mileage may vary.

But if you need more to attain the financial goals you desire than this company is willing to pay, I suspect you almost certainly need to find another company, or find a more lucrative position.

Answer 3

There are two things at play here. First, it is not about you: they don't care what you are going to do with the money or your needs. Second, there is always a market, so if no one else is paying more they have no reason to.

If you can find better offers in the area you reside, that solves the problem. If not, you may need to move somewhere that does. If such doesn't exist maybe you are in the wrong field for what you expect to earn.

Answer 4

"Well, after doing research on the cost of living in the area, the average price of homes, and the competitiveness of the home market,

Up to this point, I think it's very professional. You did your homework, you researched, you calculated cost and benefit and you came to a conclusion. That is what professional people do. The conclusion is up to you. Either you want that net package, or you don't.

I just don't see how I'll ever be able to afford to buy a house with a salary of $X."

This part however is a bit problematic. The company could care less why you drew the conclusion you did. The company will pay you what they think you are worth (preferably a lot less). Any kind of professional argument you can bring for your position must include that your work will be worth it. You having a manor or living under a bridge is both equally worthless to the company.

If you want more money, concentrate on why they should pay you more money. The only reason they should pay you more is because they profit more. Show them how they can profit more by hiring you.

If you simply want to explain why you don't take their offer, I would stick to a less personal reason. Keep it general, like "After calculating in all factors like cost of living, the offer didn't meet my financial expectations."

Answer 5

You ask:

Is it acceptable to come back and say:

"Well, after doing research on the cost of living in the area, the average price of homes, and the competitiveness of the home market, I just don't see how I'll ever be able to afford to buy a house with a salary of $X."

Or is this unprofessional?

I wouldn't say it was unprofessional, but it's unlikely to be productive for several reasons.

1. It isn't a reason to increase their offer, at best it's an explanation as to why you are turning their offer down. Compare that with "Glassdoor says the average salary for this type of position $Y." That says that they need to up their offer because most of the available candidates are going to want at least $Y.

2. It implies that you think they should be concerned with helping you achieve your non-work related goals -- where do you want that to end? Do you want them picking your spouse, should they be concerned that you haven't bowled a 300? You certainly don't want them standing in the way of your personal goals, but expecting them to make that their goal as well?

3. It's whiney. "I just don't see how I'll ever be able to..." is not a strong statement. Compare that with "I would have to get a second job in order to be able to purchase a house, and I don't want to do that". The first is "please help me" the second is "it's unacceptable".

4. It's also probably untrue -- you can probably think of several (undesirable) possibilities, cosigners, purchasing it with someone else, skipping some luxuries, the above mentioned second job, purchasing a fixer-upper.

5. And finally, if their offer is so short that you can't conceivably buy a house with that salary, then they are unlikely to raise the offer enough to enable you to do so no matter what you say. If their offer is 50% off what you would need, then it's unlikely they are going to offer that unless you really sell them on the idea that they need you.

Answer 6

Maybe you should pursue jobs that are commission based, so you can make as much as you want?

You can ask for whatever you want and if you think these perceived requirements justify the amount and you feel like you're not being unreasonable, go ahead. Personally, I wouldn't factor personal financial situations on hiring or salary offerings.

As much as I'd like to pay you what I can, the flip-side of your argument is to encourage employers to require employees to be more frugal with their money. Maybe you should live with your parents until you're married and have saved up enough for a down payment on a home. Do you really need a brand new car when you can get one a few years older?

There are plenty of cost of living indices and salary ranges for different job titles and years of experience that you can use to justify a salary requirement. Some companies can afford competitive salaries and some can't or just won't.

You have to realize everyone wants what you're asking so should an owner of a company deny herself the level of income they feel they are entitled to just so you can get yours?

I would hope salary is on your own merits and what you offer to the company with the current market factored in and not personal financial requirements. Sorry, can't afford your salary because we have employees with more children and elderly parents they have to care for than you.

Answer 7

This is a negotiation process. Usually the initial number they offer is lower than the initial number you propose, and you end up somewhere half way, sometimes closer to one, sometimes closer to the other.

In practice that doesn't go with sentences like "I want 60k." "We offer 40." "55!" "45!" "50!" "deal!", but rather more like "You know, I know I make less now, but I'll have to move and this is a more expensive area than I currently to live in. If I run the figures, I'll need something around 60k just to make effectively the same as I do now." "I see your point, but..."

At this point, it's already established you'd like to have the job (if it pays enough), and they'd like to have you (if you don't cost too much). I think any reasonable argument for why you think you should make more than what they offer should be tried and isn't unprofessional. They may or may not care, but it's how a polite negotiation goes. And it's a reasonable argument -- they know that their business is situated in a more expensive area, and that that means they will have to pay higher wages than they would elsewhere.

As in any negotiation, know what your lower limit is, and be prepared to walk away if it isn't met.

And if they've already said "we really can't offer you more than $x", I wouldn't expect them to go higher after that whatever you say, it sounds like a final offer anyway and they'll be prepared to walk away as well, of course.

In an earlier job, I managed to get a higher initial salary by arguing I was moving to a more expensive area, so it worked for me.

For my current job, we did the negotiating by email and I managed to send my mail when it was half done by accidentally hitting a GMail hotkey I didn't know existed. Don't do that...

Answer 8

is this unprofessional?

I certainly don't think so. To me, coming back with "I think that $X is too low, and here's why. How about $Y?" is better than not having an explanation. If you're worried about an onerous commute for example, the company might come back with a work-from-home offer.

Should I mention the cost of financial goals when negotiating salary?

Now that's another question.

If your reason for wanting a higher salary is simply that you want nicer things... that's not really going to fly. If you were to go that route, I would recommend arguing that the higher income would let you live closer to the workplace, making you more responsive, happier (implied: more productive, less likely to leave), and less likely to die in a traffic accident. Basically, you're selling productivity (that the company values) not the house (which you value).

It would be better to argue that you deserve the higher salary because of what you can provide to the company. Another tact is to argue that you deserve the higher salary, because you could make that much working (remotely?) for someone else - or that the company would pay more than that to get the same productivity from some non-local person. Which way to go there depends on your locale.

Also, there's one fairly common rebuttal you seem to have overlooked: the company might think that modest home ownership is viable, but not for this role. They would say "but we do a lot of promotion from within. If you do a good job, then you can be a senior widget juggler!". I would caution you strongly against taking that bait.

Answer 9

As others have said, this approach is unprofessional.

The reason it's unprofessional, though is important:

The salary is intended to have a direct relationship with how much they value your work.

Your approach isn't negotiating a salary, it's negotiating a different relationship - rather than a salary you want a house. Most companies aren't in the housing business, and have no desire to be. They use the same relationship with all their employees - time and expertise for monetary and other benefit compensation.

There may be some fields, or some cultures where the compensation is fundamentally different, and you can approach it from the angle of, "I want a house, you want work, let's make a deal."

But I suspect in your field and culture, you are going to have to figure out how much money you need, and then bargain for that money without explaining why you need the money.

The art of negotiation

But, honestly, "professionalism" is only worthwhile when it works towards your goals.

What you really need to focus on is, "How can I strengthen my negotiating position?"

There are a lot of resources for that.

The key, though, is that to obtain your own personal goals, you need to decouple them from your negotiations and use them only if they strengthen your position. Otherwise, look for other resources or knowledge that would strengthen your position.

For some companies, or individuals you might be interviewing with, arguing about the cost of living in a given area might actually strengthen your position. For others, it might weaken it. There's no "one size fits all" for this situation, so you'll need to determine what strengthens your position in a given negotiation yourself.

So don't worry about whether it's professional or acceptable. Instead, focus on whether it will achieve results in your negotiation.

Answer 10

As a potential candidate for a job you are entitled to set your salary expectation when negotiating with an employer. In a competitive market the employer can and usually will look for the best person (skills) to fill their job requirement at the lowest.

Answer 11

If I were hiring you, I'd tell you "Your financial goals are your own business and none of our concern. We are offering you what we believe is a fair, competitive and balance compensation package. You are free to reject this package and find yourself another employer."

And by the way, even if you accept our offer, your relationship with the company started off on the wrong foot. I'd certainly weigh in with my own people to withdraw our offer and give it to the next best candidate.

Don't fool yourself with the idea that you are indispensable. No one needs candidates who give headaches. Or have an attitude. And give arguments. The management of your personal goals is your domain. If you make the management of your personal goals becomes into your employer's problem, I very much doubt that they want to hold on to your services unless you are offering something that no one has. Which is very unlikely.

Answer 12

If the cost of living is much higher than elsewhere there must be some benefit of living there, for example the commute you mention. So the prices go up if you get closer, doesn't mean the salary has to go up too.

And if you work and live in a cheaper area, let's say you earn 10k less and spend 20k less, is the difference of expensive to cheap area really worth it? To an extreme you could see it like the difference between a big city and some 50-people-farm-village.

If someone told you here are 10k/year, from now on you live in nowhere's land, would you take it? All answers are correct, it depends only on what you want and expect from life.

The other point is that most people do not have an own house, because for one person to get rich with renting real estate you need a lot of people who work their ass of and pay the rent.

I heard once "you are always paying off a house, it's just either yours or your landlord's". So usually if you can afford to get a loan you are probably better off buying a house or flat. Unless the economy changes and real estate prices drop or your job security is reduced or blah blah blah. It's also a question if you have to move one day and then sell the house or if you build for eternity because all your family lives close, and so on.

To your question: I would not blame the house specifically, but you can mention that you have expected more like $XXX.XXX (yes, 6 digits just for fun :p) and that you would really hope you could come to an agreement, considering the benefits the company would have from hiring you. It's then up to them if they see this benefit-cost-ratio too.

Answer 13

Looking at this as a negotiation, one of the most important elements of a negotiation is how each side can trust the information presented and how they perceive the other party. Conveying information about the seriousness of your 'offer' can be very useful, because it changes how the other party values your offer and the likelihood of you accepting a lower offer. It's largely about signalling.

Think of it as poker. If you make a bet, your opponent (say it's a single opponent) considers the likelihood of your bet being based on a good hand versus a bluff, and even how good your hand is. If you can signal to your opponent that you are more likely to have a good hand, then you can make it more likely for your opponent to fold.

In the case of a salary negotiation, you have to consider how your employer views you - are you a great candidate they'll try to retain, or will they just say 'Well, that's what we have, take it or leave it'?

If you are a great candidate - and you can tell they really want you - then you want to encourage them to believe you are serious that you will not take a lower amount. Adding a little bit of information - "Thanks for the 60k offer, but I'm looking to buy a house because I've got a newborn on the way, and I really can't take anything lower than 65k" - signals that you're not just trying to maximize salary, but you really do need 65k. Of course, you have to be prepared to walk away (or accept) if they come back at 60, but I think the signal might be helpful (if you can make it believable, ie, something that's actually true).

This hinges on you being able to judge your own worth to them accurately, which I find is extremely hard for most people - most either significantly undervalue or significantly overvalue themselves.

Answer 14

Lots of answers already, however, there is maybe one view point missing: I've recently seen two cases where people almost walked away from good offers since they miscalculated the cost of living differences.

In general your financial goals are your own business, HOWEVER this is different: The company has probably every intention of paying a decent living wage and you assume that's not the case so there is some disconnect. It is unlikely that any company would pay wages that are below what's needed to live relatively okay in the specific area. It's simply not long term viable. Chances are, there already people in the company that make the same what you are being offered and they are probably doing all right.

So chances are there is some misinterpretation of sorts and it's okay to bring this up. This can be done non-confrontationally: "I've looked up cost of living expenses and I didn't fully understand this. Could you perhaps share a typical budget of someone in this area that has roughly the same salary that your offering. What type of residence would this allow?"

Answer 15

I'm surprised nobody brought this up but sometimes it's worth explaining to your employer that your main concern is housing. Because they can instead lower your base salary and give you a good house instead.

In many countries, income tax takes a large cut out of your salary. It could be so much that even if they raise your pay, your excess pay goes into tax. Sometimes it's best for both of you if the company pays for your house, your car, and gives you a salary that's low enough to not get hit by the hell bracket of income tax. Whereas if they also buy your house, the company itself is taxed less.

Sometimes the owners or senior management of the company make several times your salary so they have no idea how hard it is to live on a lower income. And very often they don't find out because nobody tells them.

However, do bring it up tactfully. Try not to sound like you're complaining that wages are too low to live on.