If you feel your purchasing power is decreasing with each passing year, your assumption is correct. Correct, that is, unless you have managed to receive regular wage increases that have kept pace with the annual rate of inflation. Thankfully for most Americans, the annual inflation rate isn't the 18% it was in 1918 or the 13.5% it was in 1980, levels that are very difficult to negotiate for pay increases.

Fortunately, the annual inflation rate has shrunk to about 3%, very good news for those who have to watch every penny that they spend. Of course, if your annual raises (if you get them) fail to keep pace with even this nominal rate of inflation, you are about 3% worse off than you were last year, and this compounds every year -- not a very comforting thought. Your situation would be even worse if the rate of inflation were to increase again and you were unable to convince your employer that you are deserving of a pay increase.

The Inflation Rate

The inflation rate in the United States is based on a number of complicated calculations, but principally on the Consumer Price Index (CPI), the value of a basket of goods in the current year compared to the same basket's value in an earlier base year. From 1989 to 2005, the cost of buying the same basket of goods and services rose about 3% per year on average.

For you as a consumer, this means, in theory, that everything is costing you at least 3% more every year. Obviously, you need to find a way to keep pace with these increases. Running to your employer and telling him or her that you need an immediate raise of 3% each year is simply not going to work. Although it is a good argument, complaining that the cost of fuel, insurance, college education and numerous other factors are eating into your income won't work either, although every employee feels that it should. Instead, you need to base your argument on factors with which your employer can relate.

If you are convinced that your contributions as an employee to the company are worthy of a raise and you have decided to press the issue, consider and research the following information. Have the results available when it comes time to meet with your supervisor to discuss your request in detail.

Do Your Research

Before deciding how big you think your raise should be, research the salary amount that other people who perform the same tasks (in your office or in your profession as a whole) are earning. Find out your worth discreetly through friends, co-workers and acquaintances who work in your same field. This amount is just a starting point.

How much in money and training would it cost your employer to replace you? The more valuable you are to the company, the more willing they should be to meet your reasonable demands for a pay increase. State and federal agencies, such as the Bureau of Labor Statistics, http://stats.bls.gov/ocshome.htm, provide free information. This Web site resource offers excellent data on hundreds of professions and includes regional salaries and a list of state contact numbers.

Determine The Company's Financial Health

Before going further, realistically determine the financial health of the company where you are employed. If your employer is in financial straits, the fact that you are truly deserving of a raise will not matter. However, in good economic times, pursue your raise vigorously. There is no reason why the good times and profits shouldn't be spread around to everyone who has helped contribute to the success of the company. When financial times are tight for your employer, you may have to delay your pursuit of a raise until conditions improve and your employer is able to reward your efforts.

Be sure to make a reasonable and realistic assessment of your employer's financial situation. The key is finding a happy median between the employee's intuition and the employer's mind set.

Key Questions

Ask yourself these telling questions:

• What is the present financial status of my employer?
   

• Have they hired new employees, let workers go, or has the staff remained relatively static? (If the company is hiring new employees there should be money that can lead to a pay raise for you as well.)
   

• Is your employer a struggling start-up, a highly profitable, national corporation or does it fall somewhere in between?
   

• Is business increasing and expanding, has it slowed significantly or has it stayed the same? Are finances presently tight in the company?
   

• What is the forecast for profitability as a whole, for the company and the industry in which you work?

Positive responses to these questions should clue you in to the fact that this may be the time to ask for a raise that the company can afford.

Assess Your Worth

If you are about to ask for a raise, be able to prove that you will be worth the extra money.

Ask yourself these questions:

• How do I add value or contribute to the company and its customers?
   

• Do I produce more of what I am expected to produce?
   

• Do I accomplish more than my co-workers do and exceed the industry averages? Am I producing a better service or product for the clients?
   

• Does what I do attract or retain more clients?
   

• Have I been asked to take on additional duties or responsibilities compared to what I was originally hired or contracted to do?
   

• Do I help save the company money by taking on these additional duties or by reducing production costs?

Make a list of the positive answers to these questions and be prepared to present them to your supervisor or employer when you feel the time is right to ask for your raise.

Know Company Policy

Next, decide on how much of a raise you are going to ask for. Your company's personnel handbook will usually outline policies regarding pay increases, such as the standard that your company applies when considering pay raises and the maximum or minimal limit that is applied. When are raises normally given, and what is the criterion for review? Most importantly, find out who has the power to approve or deny your request.

When going into salary negotiations, know what your minimal standards are going to be and consider how firm or flexible you are willing to be with your demands. In other words, if you are willing to quit your job over your demands, you might have a strong bargaining position, although you may not have a job by the time you reach the end of your discussion.

Reasonable Request

Therefore, clearly define your parameters and determine how far you are willing to go in order to have your demands met. The ultimate goal is not to be unreasonable in your request. At the same time, don't underestimate your worth and cower at the first sign of debate -- if you feel confident that you deserve a pay increase.

Avoid ultimatums and confrontation with your boss; they will accomplish nothing toward reaching your ultimate goal of securing a wage hike. Remember that employers want to retain employees who want to be with the company and who are committed to its long-term success.

Don't alienate yourself from the individual who is responsible for deciding whether or not to approve your request. Unless you already have lined up another job, confrontational situations should be avoided at all costs. If a raise is declined this time around, you can always try again at a later date.

Take a negative result of this meeting and use it to your advantage for future negotiations in securing a raise. Remember that a "no" today creates potential for a "yes" laterif you know how to use the information you have obtained from your interview to your advantage. Most importantly, get a reason for a denial of your request. In this way, you will know what you need to work on in order to improve your position and almost guarantee yourself a raise the next time around.

Ask your employer, "How can I improve my performance?", "What do I need to do in order to increase my chances for a raise?"

Negotiate Perks

If your employer is unable to accommodate your request now, try to find additional ways to be reimbursed. Negotiate additional vacation or holiday leave or any other fringe benefit you feel would be beneficial. If you fail to secure the increase or a satisfactory substitute, remain persistent.

Most pay increases are not gained through one conversation with an employer but through long-term, mutual dedication and more than one request. Follow the parameters that your employer has presented and try again in another three to six months and then repeatedly until you get paid what you're worth.

Ultimately, the only way to be paid what you are worth, is to work for yourself. Wouldnt it be wonderful have unlimited upside income potential, be able to set your own hours, and work only with people you absolutely enjoy? Consider self-employment as the best method in the world to be paid what you are truly worth.

For solid self-employment strategy, be sure to pick up a complimentary subscription to FREE MONEY TIPSThe Worlds Leading Money Strategy Newsletter. You can receive this and other valuable help by visiting http://www.TheMoneyExpert.com.

-Phillip W. Gunthert is a Financial Hotline Educator with http://www.TheMoneyExpert.com

2006 International Administrative Services, Inc.