Ever since Jack started his professional career, he has been in search of a job that would give him the opportunity to express his true self. A job that would not just help him achieve his dreams but also make him challenge himself. At the same time, becoming rich was also an important goal on his list.
Amazingly, Jack never had to worry about getting a job, but he really sucked at salary negotiations. He would always enter a job interview with high expectations and would come out perplexed about whether he should be happy or not.
When appearing for a job interview, Jack was always asked “what salary do you expect?”. At that point, he would tend to evaluate his expected salary based on what he was paid at his previous job and an additional industry-based hike. But he wondered if that was the right way to ask what he wanted and what would he need to do to get paid well.
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How does one plan their expected salary or income?
Let’s talk about a few things that would help Jack decide how much he should earn and thus how should he negotiate his salary ask.
ONE’S NEEDS
The money needed for one’s survival constitutes the first part of their income. Overall basic needs needed for day-to-day survival are shelter, food, clothing, travel expenses, etc. Day-to-day needs might vary based on one’s income level as our expected quality of life (QoL) changes with our income. We invest more in basic needs if our income is more and vice versa.
ONE’S WANTS
Apart from one’s basic needs, anything one wants to buy also has to be paid for by their income which is the second part of one’s income. Most times, our wants are influenced by society and those around us. As an example, we might be living in a decent house, yet we always aspire to build ourselves a castle.
So, what’s needed for one to plan their income?
ABILITY
For a person to afford both their needs and wants, they have to have the ability to earn more than or equal to the total amount of needs and wants in terms of money.
One needs to keep in mind that the basic psychology on which the market operates is:
“Others will always undervalue you and you tend to always underestimate your capabilities”
The income of a person is often decided by the market by comparing their ability with the income levels of peers with similar abilities. Hence most often the market decides a person’s income irrespective of what their exact needs and wants are. The person is left to decide whether his or her income is enough. In case the income falls short of needs and wants, the person has two options:
- Compromise their needs and wants to adjust based on their income
- Increase their knowledge by learning more to develop their abilities and seek better income
Most people opt for the first option and settle. Very few go for option 2.
KNOWLEDGE
Exposure to new things enhances a person’s knowledge which in turn adds to enhanced ability. Once the ability is enhanced, a person can seek income accordingly.
The Income Plan
The income of a person should pay for needs, and wants, and enhance ability through knowledge gain. So a person should have a proper plan with definite goals to increase their income instead of depending on the market to decide it for them.
Income >= Needs + Wants + Ability Development Costs
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Jack Plans his Income
Jack is planning his financials finally as this time he really wants to walk out of his next interview happy.
Jack’s Needs: Jack needs to pay rent, buy food, travel, and support his family. His monthly costs are:
Rent = Rs. 5000, Food Expenses = Rs. 6000, Travel Expenses = Rs. 4000, Miscellaneous = Rs. 5000, Family Support = Rs. 10000 Total = Rs. 30000.
Jack’s Wants: Jack wants to buy a home worth Rs. 7 Lakhs and a car worth Rs. 5 Lakhs which amounts to a total of Rs. 12 lakhs.
Jack plans to afford his needs and save surplus income for two years in order to buy his wants. In two years, needs and wants amount to a total of Rs. 19.2 lakhs, Rs. 80000 per month.
Now if Jack’s current income is not enough for him to afford his needs and wants, there are two possibilities; either Jack has not explained his ability properly to his prospective employer or Jack does not have the exact ability to contribute enough to earn for his needs and wants.
In the former case, Jack should figure out ways to convince the employer of his abilities & contribution by explaining his role in helping develop the employer’s overall business instead of being compared to market levels or find an employer who understands Jack’s ability and acknowledges his contribution properly. In the latter case, Jack should develop his ability by investing in knowledge gain.
Deciding your expected income based on market norms could work, however, there is a risk of you being dependent on the market to decide how much you should earn. Hence your lifestyle will be restricted and dependent on what your perceived market value is.
So, it’s important that you take control of your earnings and plan it in a way to lead your lifestyle your way!
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If you have any recommendations for me to amend this article or add more points, please comment below or write me a note at jagsirsinghchauhan@gmail.com
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Really insightful. The ability development costs is something we must start to consider seriously!
Ability development cost is something I am learning new. Thanks for the thoughtful post.