You've probably already made this huge salary negotiation mistake

The Broke Millennial book by Erin Lowry. (Cover provided by TarcherPerigeey.)

“I didn’t negotiate my first job out of college,” 33-year-old freelancer and personal finance writer Kristin Wong told me. “It didn’t seem like negotiating was an option, and at the time, I didn’t understand the whole process of negotiating. I felt grateful just to have a job, and I think that’s a problem for a lot of people.”

Like Wong, and probably you, I didn’t negotiate on my first job out of college, or on my second job when I switched fields from entertainment to public relations.

Unfortunately, this move could be costly in the long run.

“A study from George Mason and Temple University found that an employee who neglects to negotiate their first-ever salary could lose out on $600,000 over the course of their career,” Wong said. “Yes, there are other variables to consider with this figure, but it shows just how much not asking for more money can add up over time. You lose out on hundreds of thousands of dollars.”

This study determined that those who negotiate on starting salaries usually end up with $5,000 more than their non-negotiating counterparts (Wong, me, probably you). That amount might seem like chump change at first, until you factor that into the entirety of your career, which is where that freakish extra $600,000 over the span of a 40-year career comes from.

You may have tried and failed to negotiate your starting salary at your first job because some companies draw a hard line on entry-level compensation and that’s it. If you find this to be the case, make an effort to negotiate for something small just to get the experience. Perhaps request two days a month to work remotely, or ask the company to cover a continuing education course that’s related to your job. At the very least, this will give you some practice in negotiation, and you may even find that the company is willing to meet your demands.

Know, But Don’t Share, Your Bottom Line

Whether you’re negotiating for a job or trying to buy a house, it’s important to know your bottom line—the bare minimum you’re willing to accept or pay. This number needs to be kept a secret in your head. Your opponent—yeah, we’re going to call the person across the table your opponent—is going to try to get you to reveal this number. Don’t do it.

Okay, opponent may be the wrong word, because Wong raises a good point.

“It’s not about confrontation or trying to squeeze the other party,” she said. “It’s about coming to a mutually beneficial agreement. After all, you’re providing value. They’re getting something out of the process too.”

A mutually beneficial agreement is important; however, letting someone know how much you expect to be paid makes it pretty easy for you to get low-balled. Even when you offer a range—like stating $62,000 to $70,000—you’ve made it clear that you’ll accept $62,000. You need to know your bottom line—and stick to it. Don’t negotiate against yourself.

This becomes a bit challenging for freelancers since you set your own rates, but there are a few ways around this that will be discussed later on in the chapter.

Learn How to Value Yourself

This obnoxious abstract phrase provides the foundation for your entire negotiation strategy: you have to know your worth. “I have a bad habit of undervaluing myself, so I always force myself ask for 15 percent more,” Wong told me. “There was a report from Clarke University that said employers can typically afford to offer 15 percent to 20 percent more than their initial rate, so I think it’s a safe rule of thumb. When I have to toss out the first number, I typically tack on 15 percent more than my knee-jerk rate, because I know my knee-jerk rate is usually low.”

Tips for the traditionally employed (employees at companies)

What are other people making? Know what people in your position at other companies are making by using Web site like Salary.com and GlassDoor.com and by just asking real-life people. Be sure you’re asking people who work in the same or a similar city in order to get the most accurate information.

What’s cost of living? Don’t forget to account for the cost of living in your area when searching the median salaries for your job. You can often filter online search results for your local market.

Don’t get mad—get paid! Don’t get mad if you determine you’re underpaid relative to the market average for your position or just within your own company. Instead, get ready to negotiate!

Tips for freelancers (the self-employed)

Research means talking, not using Web sites. Unlike the traditionally employed, it’s a bit harder for freelancers to search for median salaries on Web sites so it’s imperative to talk, talk, talk to other freelancers about rates. One of the biggest reasons companies can get away with underpaying freelancers is our lack of communication with each other.

Awkward chats help raise the collective price point. It may feel incredibly vulnerable to share with a fellow freelancer how much you’re making on a project. She could judge your ability to negotiate, or you might feel awkward that it’s a high number, or you may not want to risk a client getting snaked. All valid points, but the only way to keep raising the collective price point is if more people in your field start to demand more money.

Ditch the scarcity mind-set. Some clients may very well look for someone at a lower price point, but that’s their loss. You want to work with clients who are willing to pay you what you are worth. And those clients do exist. It can be scary to cut lower-paying clients off your roster as you grow, but it’s an important part of getting paid what you deserve.

Whether you are negotiating on a starting salary or meeting with a boss for an annual review or communicating to a client that you’re raising your rates as a freelancer, it’s important to learn the delicate act of making your demands, but with tact and, more importantly, proof to back up your claim that you deserve more.

Excerpted fromBroke Millennial: Stop Scraping By and Get Your Financial Life Together, by Erin Lowry, with the permission of TarcherPerigee, an imprint of Penguin Random House. It is available from Amazon.