In the last installment of a three-part series, financial expert David Bach, author of the new book, "Start Late, Finish Rich," shares tips on how to dramatically boost your savings.
Spending less and saving more are essential to building a retirement nest egg. But you can really grow your savings if you figure out how to earn more.
"People get raises every single day," Bach writes in his new book. "Right now, as you read this, someone somewhere is asking for and getting a raise. Why isn't this person you?"
While Bach believes that anyone is capable of getting a raise, he warns that it takes more than being a good employee.
"When you talk to business owners ... they will tell you that it's not the bad employees who concern them, because those people ultimately will quit or get fired. No, what really bugs them are the good employees, the ones who do what it takes to be OK, but never enough to be great. Bosses don't hate good employees, but they don't love them either.
"The number-one challenge facing virtually every employer and boss in America is finding great employees. Employers will pay twice as much for a great employee as they pay for a good employee."
Armed with this information, it's time to discuss in detail how Bach recommends getting a raise.
Bach's 4-Week Plan to Getting a Raise
- Decide What You Want - Decide exactly what you're going after, when you're going to get it and how you're going to get it. Write all of this down. As Bach points out, doing this does not guarantee that you'll meet your goals, but it gives you an important direction, which is crucial. If you're serious about getting a raise, you need to able to formulate specific, concrete details and plans. Writing things down ensures that you're doing so.
- Question Your Credentials - Now that you know what you want, you have to be honest with yourself. If you were in your boss' shoes, would you grant yourself a raise? You need to determine how productive you are at work and what makes you valuable to your boss. In the book, Bach lists "The Seven Magic Questions" you should consider. One of them is: Knowing what he or she has learned about me in all the time I've worked here, would my boss hire me today?
- Know Where You Rank - As part of the self-evaluation process, you need to rank yourself according to the 20/60/20 rule. According to Bach, employees break down into three distinct groups.
Twenty percent have no clue: These are the employees who are working almost in spite of themselves. They barely make it to work on time and don't pull their weight around the office.
Sixty percent want a clue: The majority of employees are hard workers who do what they think they are supposed to do. They try hard, but life never seems easy for them.
Twenty percent have a clue: These are the people who come to work with career and income goals. They know how to make friends and influence people. Within this top group is an even smaller group of folks who go one-step further, the "clue creators" if you will. They are the ones who run the show.
Chances are that you know exactly which group you fall into, Bach says, as does your boss.
Now, if you don't like your ranking, you need to make an effort to change your standing. When you questioned your credentials, you discovered your strengths and weaknesses. You discovered how you can be valuable to your boss. Using that information, you can put together an action plan for moving into the top 20 percent of folks who "have a clue."
After taking a brutal look at your job performance, you may discover that you haven't actually earned a raise. That's OK, because now you know what you have to do to improve.
"I've seen people go from being on the verge of being fired to doubling their income in six months by getting their act together," Bach writes. "All it takes is turning around the impression people have of you."
- Ask For The Raise - If you realize that your boss may not be willing to give you a raise at this point in your career, still arrange to meet with him or her. Explain that you would like to become more valuable to the company and ask how you can do your job better. Then, ask what it would take for you to get a raise in the next six months. You'll be surprised how effective this can be.
If you come to your meeting armed with the knowledge that you do indeed deserve a raise right now, know exactly how much you want. Bach suggests putting the proposal in percentage terms.
"A humble request for a five percent raise, starting in the next 90 days may be easier for your boss to handle than a demand for a $2,500 raise - even if both amount to the same thing." Bach writes. Or, ask for a raise in monthly or biweekly amounts - "I would like to increase my compensation by $50 a week," instead of asking for a raise of $2,500.
Bach reminds readers that "living to retire is not living." Life doesn't start once you have a giant 401(k). You need to continue to "live rich" as you work on becoming rich.