If you've ever asked yourself, "What is a good salary, really?" while analyzing an offer letter or doing end-of-year accounting to figure out if you should ask for a raise, you are not alone. In fact, a 2017 PayScale study suggests that over two-thirds of working adults don't know the market rate for their role.
The good news is that with a logical approach and open-source data—both of which this article will provide—you can figure out what a "good" salary is for you.
A Two-Factor Approach to Analyzing Salaries
Before diving into the data, let's remind ourselves that the answer to "what is a good salary?" is just as subjective as the answers to questions like "who should I end up with?" or "what is the best thing to eat for dinner?" The responses that are right for me may not work for you, and that's okay. (In fact, that's great, as it means we'll probably avoid polygamy charges.)
When analyzing your salary, you need to consider two things: first, whether it meets your needs, and second, whether it's fair.
What Salary Would Meet Your Needs?
The first step in deciding if a salary is good or not is defining what your needs are. Where do you live and how much is your rent? How much do you spend on food? How much debt do you have and how are you planning to pay it off? What do you want to accomplish in life—having children, buying a house, starting a company?—and how much money would you need to be making in order to do that? Fill out a monthly budget and determine what salary (considering local taxes) would meet your needs and goals, and then add on 10-30% as a savings buffer. That's your ideal salary.
If your current salary meets or exceeds that, wonderful—we're off to a good start. If there's a gap between the salary you need and the salary you have, we need to address that first.
Let's say you've come up with $60,000 as your ideal salary, but your current job only pays you $54,000. Does that mean you can go ask your boss for an extra 6k because your lifestyle requires more income? Not in the slightest. Your salary is based on what you bring to work, not on what your life is outside of work. As long as your salary is fair considering your education, experience, and industry—more on that in a minute—asking for more money simply because of your life situation isn't a good way to approach the problem.
What are reasonable approaches? Considering a new industry, leveling up your value at work, or reducing your needs.
If you've determined that 60k is the magic number for you, but salary data aggregation sites like Glassdoor and Indeed show that your field tops out around 55k, maybe it's time to consider making a move to an industry that can better support your needs. Take a look at the Bureau of Labor Statistics' fastest-growing occupations page and see if anything piques your interest. Are you a computer systems analyst (average annual pay: $88,000) who could transition to a job in the field of information security (average annual pay: $98,000)?
If you're not interested in switching fields, think about ways you can increase your value in your current one. Are there additional certifications or trainings you can complete? Can you take on managerial or hiring responsibilities?
The last two ideas were for raising your salary. But could you also reduce your need? Can you find a cheaper apartment or refinance your student loans? Or can you move to a more affordable place? This cost of living calculator can show you how much you'd need to earn to maintain your current standard of living in other places, and if you can find a good-paying job in a much-cheaper city, you may find your salary to go much further.
For instance, let's say you live in New York City and make the median salary for a marketing manager there ($173,000). If you were to move to Raleigh, North Carolina, you'd only need a salary of $72,000 to have the same standard of living, according to the PayScale calculator, but the median salary for that job in that city is $141,000.
Is Your Salary Fair?
Just because you can live off of a given salary doesn't mean that it's fair. To determine whether your salary is competitive considering your level of expertise and industry, look at the following resources:
1) National data for your job title. Start with the Bureau of Labor Statistics, where you can drill into salaries by area (like East Coast versus Midwest) and individual states.
2) Company data. Get one level deeper and look at the Glassdoor data for your company and for their closest competitors. What are they paying people whose responsibility sets are similar to yours?
3) Individual data. Ask your coworkers if they're comfortable sharing their salary ranges to help you benchmark yours. This is especially important for women and people of color to do, since gender and race gaps still persist in salaries.
Make sure you consider education levels and years of experience for different salaries. Someone three years out of a bachelor's may not make the same as someone just starting off, and someone with a graduate degree may make more than someone without.
For example, let's say you're a software developer with four years of experience working in Chicago being paid $62,000 a year. Well, national data says your salary is in the 10th percentile for employees in the greater Chicago area, and Glassdoor data shows that the average salary for your role is closer to $86,000. Your mentor tells you that he made $75,000 when he was four years out of college, with the same experience you have now. If you find yourself in a situation like this, prepare for a salary negotiation and ask for what you deserve.
And Remember
A good salary is dependent on the specific circumstances of your life. Understand what kind of salary you'd need to meet your needs and your goals in life, then utilize data specific to your industry and geographic location to hone in on what would be reasonable, and make adjustments (either by switching jobs or industries, advocating for a salary increase, or reducing your costs) as needed.
