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.