Image by rossbreadmore via Flickr
Financial Samurai had a great post about why we should never tell anyone how much money we make. I think that this is good, sound, advice to follow, because what we don’t tell other people can’t hurt them. Human nature being what it can be, money can have a way of changing a relationship. Will you look at that girl differently if you know that her parents bought her home and car? What about if you have a friend who’s usually very frugal, to the point of being cheap. Will you look at him differently if you know that he also has a six-figure salary? Why doesn’t he chip in more when it comes to parties and events?
Too much knowledge can be a deadly thing.
It really depends on the person, I think. I have a competitive friend like Peter in Financial Samurai’s example, and if I happen to so much as arrive at a place faster than him, he’ll be offended. That’s how competitive he is. With this friend, I’m careful to keep some things to myself and to let him think he’s better than me, so that we can stay on good terms.
However, could there be times when it’s a good idea to tell someone how much you make? Some situations are straightforward, while some can be tricky.
When does a couple start talking about their finances?
When I was first dating my current girlfriend, she thought I had more than I did, because back then I was spending everything I earned and drove a new car, even though I was a student working part-time! Spending all that money wasn’t the greatest idea, but on the other hand, I guess it did make a good impression.
Later on, when we were considering buying a place together, we had to be fully aware of the state of each other’s finances since we would both be paying for the place. I had less money saved up, so I was leaning toward a less expensive place though at the same time we had to find a place that would suit the both of us. In the end we were able to find a place that we are both happy with, and that has a lot of good advantages without being too expensive. At this stage of a relationship, it’s really important to be sharing all of your financial details, because if one partner believes the other has less or more than they really do, it can lead to some real trouble down the road. How many divorces are caused by money problems?
I believe that if you are ready to move in with your significant other, this is the time to make sure you are both fully aware of each other’s finances.
Finding out where you really stand at work.
In Financial Samurai’s example, one of the reasons that Peter wanted to know is because he was negotiating a package with a potential new employer. Sharing the information didn’t work out, but I have also been in Peter’s shoes, and it can be very helpful to learn as much as you can so you know that where you stand.
Sharing salaries in a workplace setting between coworkers is usually a major no-no, due to the office relationship and morale problems that it can cause. It can be difficult to know where you stand and what is fair & not fair, especially if you’re still inexperienced. There are resources out there, such as Glassdoor, which claim to provide the inside scoop on actual compensation within a company. With these websites you can get a general idea of where you stand, and see if you’re high or low. When you stay at a place long enough and are on good terms with your co-workers, you can find out what is fair and what is not fair, and what general ranges should be.
I can say that it does make a difference when you learn if you’re high, low, or average. Learning that you’re on the low-side can be a demotivator, but can also push you to look for better opportunities. Learning that you’re on the high-side can be motivation to make sure you’re worth it, so that you’re not targeted in the next round of layoffs! Learning that a company compensates due to factors such as friendship with the boss or seniority, or due to factors such as performance can tell you a lot about how a company is being run. In this situation, if you’re trying to help someone out, you don’t necessarily have to tell them what you’re making, but you can help them out a great deal if you know how they work and where they stand relative to their peers in the company.
I know a person who was working as a project coordinator, and in their case they were able to directly see other people’s salaries through the company’s intranet. They then had a very strong case for a salary raise when they learned that they were being underpaid relative to their peers.
So, reader, what are your thoughts? It can be dangerous to reveal how much you make, especially with a competitive personality, but on the other hand if you have a fellow colleague that you know could do better, you would want to help them out. I think this is a situation where it might still be dangerous to reveal how much your own compensation is, but you can still help them in another way, by providing guidelines that relate them to the local industry median, given their own talents and abilities.
I think you can be a good friend without revealing how much you make, even if someone is negotiating a package like in Sam’s example. I think later on in the post or in comments, he said that a range could work out better, which could be a reasonable compromise. Similarly, you could just try to help with research and preparation for then negotiation without disclosing your precise salary. If info is personal or could risk a relationship, it’s not worth sharing in my book.
I just thought of something else: It’s usually a lot less risky to tell someone what you’re making if you’re pretty sure that they’re making more than you, but you two aren’t too far apart otherwise. The envy and jealousy factor kicks in if you put the spotlight on yourself, but if you make your friend feel better then it’s the opposite effect in play, right?
I agree with you that it’s not worth sharing the info if it can lead to problems and risk a relationship, except in the case of a couple moving in together. If sharing info will risk the relationship at that stage, then maybe they shouldn’t be moving in together.
I don’t think it’s even safe to talk to someone about how much you make even if you are sure they make more than you. In far too many cases this results in a slight loss of respect because so many of us equate income with prestige and competency.
I definitely agree though that you have to be absolutely open about finances with a significant other. I was lucky enough to fall for someone who wants to live a similar lifestyle to mine, and has similar goals. We even have the same profession (teaching), so it works pretty well.
I’m happy that you found someone to share much in common. I am also lucky in the same way, although we seem so different at face value.
My counterpoint is that it makes me happy when people think I’m doing worse than I really am, especially with the competitive types. So, instead of saying nothing I might lowball it and let them feel good about themselves. I think there are circumstances when you can share salary, but in my personal case its limited to close family and a couple of good colleagues. I especially like the idea of being understated and not flaunting what you have because that can lead to problems, of a worse kind than if people simply underestimate you.
It shouldn’t be that difficult to find the salary range in your profession. I think you can find that information on the internet. There is no way that I would share salary with my co workers. I probably share with my college buddies if they asked, but I’m pretty sure they make more than I do. They live in the more expensive part of the country.
Yep there are resources like Glassdoor or Salary.com, but I personally find them to be not that accurate.
The internet is filled with information about salary ranges. You can always call Human Resources of major companies and ask what a salary range is for a particular job. You can read job postings if you are trying to research the market.
I see no reason to share information unless it is anonymous.
I personally find the internet resources to be not that accurate, but they are a good starting point.
About calling up external HRs — I haven’t actually tried that before. Our own internal HR department did not want to share this information (they used to but have since changed policy), so I am surprised that it would be available by calling up external HRs. That’s an interesting tip!
If someone asked me I would tell them, but on the other-hand I would never be the one asking because I know some people take offense. I’d like to see it stop being a taboo subject.
I don’t know if it’s a uniquely North-American thing or a uniquely Western thing. It does seem that Chinese people have no qualms at all about discussing monthly salaries — in fact it’s a routine topic that is par for the course, just like the weather or what not. 😉
I like the guideline your provide regarding if you’re about to move in with each other. However, I would still guide LOWER than what you are really making until you tie the knot!
Buying the place together would be like tying the knot. 🙂 If it’s renting together, maybe you can guide lower but there should be no reason to do so unless you two have been rushing into things and still don’t know each other that well.
My income is written all over my blog. And my debts. I don’t care. I put it all out there for everyone to see. The difference between me and everyone is the ability to say no. If people get an ill will towards me because I won’t buy them something or won’t front a bill, I just cut them back. That’s one less person that I have to ask me for things. It makes life much more simpler.
What if your girl had left you once she found out that you made less than she thought? You would have told her to “kick rocks,” right? I hope so. Put it out there, as long as it is not presented in a way that it’s bragging. What’s there to be afraid of. People will judge you either way.
That can be tough, but kudos to you for sticking it out. In my case, my girlfriend might not have known exact balances, but she knew pretty much where I stood years before we bought a place together, and vice versa. If she had left me then, then it would have meant that she wasn’t really the right girl, but she didn’t and here we are. 🙂
Discussing your salary is generally taboo in Australia too. I’m not really into sharing what I earn, but at the same time if someone asks me straight up I don’t like avoiding it either. I guess it depends on who is doing the asking.
True, that’s a good point. I found that eastern cultures find different things taboo, and some have no qualms about asking your monthly salary. 😉
I try to help colleagues a lot. I was friends with someone who was newer to the company and he would ask me about typical raises, etc. I would share percentages and what to expect (which was helpful), but never figures. He recently left the company and told me the % pay increase he got, but not his salary. It was still helpful. I think it’s okay to talk about benefit packages and stuff, but specific salary is still pretty taboo.
There is one exception. I share my exact salary all the time with headhunters because I don’t want them coming to me with offers that are below what I’m currently making. It is also good market data for them to feed back to their customer base.
Interesting point about the head hunters. Sharing percentages makes sense, and I remember a while ago another coworker would give me ranges as in between this and this amount, without necessarily revealing what she her self was making.
Your competitive friend has some issues. I hope he’s balancing the friendship with some good traits. Money is pretty taboo because of the many different reactions it sparks. I recently had salary talks with a friend. I didn’t go into exact numbers. I used percentages above and below average and percentage above current salary. Nice post!
Haha, well he’s fun for games and things like that. It’s too bad about money being taboo in our society though, really I bet a lot of problems come from acting so mysterious about money.