

I’ve recently read several articles revealing women’s money mistakes; not saving enough for retirement, incurring too much debt, giving money to family members, taking on children’s debts by co-signing their loans, and relying on the men in their lives to handle finances and investments. While spending too much on handbags and not knowing how much your husband’s 401(k) is worth are not smart money practices, I feel the biggest money mistake a woman can make is:
Not negotiating a higher salary
According to Linda Babcock and Sara Laschever in their book
Women Don't Ask: The High Cost of Avoiding Negotiation--and Positive Strategies for Change
:
By not negotiating a first salary, an individual stands to lose more than $500,000 by age 60—and men are more than four times as likely as women to negotiate a first salary.
$500,000 could have bought a lot of overpriced handbags over the course of a women’s life. In addition to earning less in wages, not negotiating a higher salary leads to women contributing less to their 401(k) plans, receiving smaller 401(k) matching contributions and earning smaller social security credits.
Linda Babcock and Sara Laschever also reveal:
- Many women are so grateful to be offered a job that they accept what they are offered and don't negotiate their salaries.
- Women often don't know the market value of their work: Women report salary expectations between 3 and 32 percent lower than those of men for the same jobs; men expect to earn 13 percent more than women during their first year of full-time work and 32 percent more at their career peaks.
This was certainly true in my case. I’ve never negotiated for a higher salary not once. When I started out in my career I had no idea what I was worth – my confidence was so low upon graduating from college I actually thought I was unemployable. When I was offered my first real job at $6.29 an hour in 1986 I was happy to just be employed.
I wasn’t the only woman not negotiating:
My second job a year later paid $14,500 a year. I thought this was low until my female co-worker hired a few months prior with similar qualifications disclosed she was earning even less.
As my career progressed I continued to avoid negotiating salary:
Once I became a CPA in the late 90’s, I relied on my credentials to ensure I was paid a fair wage. I was working at an engineering firm when I obtained my CPA license. Shortly afterwards my employer fired my manager who they thought was lazy and offered me his job. My new annual salary would be $35,000, a 9% increase over my current salary of $32,000. My former lazy manager had been making $75,000 a year. I accepted this position without questioning my new salary, researching the market or negotiating for more.
Other attitudes at the time:
One of my female co-workers, ten years my senior and our company’s office manager offered the following advice:
She felt it was preferable to make a lower salary than what you were worth because in doing so you were insuring employment. Throughout her career she had witnessed numerous individuals who were underpaid be the first to be hired and the last to be let go when layoffs came around. In her opinion, the highest paid employee was always the first one fired.
Why this advice is so horrible?
Unfortunately, I think she mistook highest paid for overpaid. In the recent economic downturn, in addition to down-sizing every employee who wasn’t absolutely necessary many employers reduced the salaries of their remaining employees. Now an underpaid employee was earning even less.
Salary-cuts at my current company remained in effect for three years. I lost $15,000 in gross wages. Already on the low end of the salary scale, during the salary reduction years I was substantially underpaid for my position and work experience.
Men in my circles do negotiate more often:
Last year my husband received the standard cost-of-living raise during his salary review. At the end of his meeting he expressed displeasure with his raise, reiterated his yearly accomplishments and told his manager he had been expecting more. His manager agreed to think over his decision and get back to him. I was astonished. Never in my life would I have asked for more money. His company was still struggling, despite my husband’s project going well; how could he expect more money. My husband felt differently. He was working on one of the most important projects of his career at this company. There was never a better time to ask for more money besides what did he have to lose. He was right and ended up receiving the raise he had been expecting.
While raises have been frozen at my company for four years:
Three male managers I know of have asked for more money. One was flat-out refused – he handled the negotiations so poorly he eventually was demoted; one was denied then given a surprise year-end bonus of $10,000 and the third received exactly what he asked for.
Men are not better negotiators than women. Women more often than men take a "collaborative" or cooperative approach to negotiation that has been shown to produce agreements that are better for both sides. Women are more likely than men to listen to the needs and concerns of the other side, communicate their own priorities and pressures, and try to find solutions that benefit all parties—to find the win/win solutions. This approach not only leads to better outcomes for everyone, it often produces creative solutions to problems that might have been overlooked by men taking a more competitive or adversarial approach. Also, by looking for those win/win solutions, women tend to preserve and enhance long-term business relationships—they don't burn as many bridges as men who focus on short-term gains.
It is also important to note:
Failing to negotiate is not just a boomer problem:
Younger women may assume that things have changed far more than they have, but according to Babcock and Laschever studies among men and women in their 20s and early 30s, men are much more likely to initiate negotiations than women.
Don’t forget to negotiate your bonus:
In addition to negotiating salary, many jobs now come with a pre-negotiated bonus plan. Women may think they are being paid a fair salary, but are unaware their male counterparts negotiated and are earning a much higher year-end bonus. While researching salaries with your networks don’t forget to collect information on bonus plans.
Have you ever attempted to negotiate a higher salary? What was the result? What do you feel is the biggest money mistake women make?
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