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Financial Peace University Lesson 8 – That’s Not Good Enough!

December 4, 2009 · Filed Under Financial Peace University · 3 Comments 

How to Buy Only Big, Big Bargains

This week’s lesson centered around making purchases, especially bigger ones, and getting really good deals on those purchases.  The main way to accomplish this, and what Dave spent most of the lesson discussing, was through negotiation.

Negotiate everything

First he pointed out the difference between the US and most other cultures of the world.  In the US for some reason, most people are very reluctant to ask for bargains.  Of course this is quite the opposite in numerous other countries where haggling takes place over just about every purchase.

So, the first thing you need to do is change your mindset – it is ok to haggle and get a good deal.  Negotiate everything and don’t be afraid to ask for a good deal.  What’s the worst thing that could happen – they say “no?”  If that happens, you’re no worse off than if you hadn’t asked at all, so who cares?  If you ask, you might get a great deal, if you don’t ask, you definitely will not get that deal.

Dave’s Seven Basic Rules of Negotiating

  1. Always tell the truth
  2. Use the power of cash – it is emotional, visual, and has immediacy.  Ramsey likes to tell stories of how when he is looking for a really good deal, he walks into stores with hundred dollar bills.  He claims that he can usually get a really good deal when he starts peeling off and counting those $100 bills in front of the salesperson.  He also seems to have a ton of fun doing it – I think I need to try this for our next significant purchase.
  3. Use your “walk-away power” – it is critically important that you keep an emotional distance from the item.  If the salesperson knows that you have already bought the item emotionally, then there is no need to negotiate with you, is there?
  4. Shut up – ask questions, gather information, and just listen.  If you let the other person do most of the talking, you might just be surprised what you end up hearing!
  5. “That’s not good enough.” – This is Ramsey’s favorite phrase during a negotiation.  He suggests saying it and seeing what happens.
  6. Good guy, bad guy – when someone is using this technique on you, the way to neutralize it is to get to the bad guy and directly negotiate with him/her.
  7. Use the “If I” take away technique – in other negotiating classes I’ve taken this was referred to as “nibbling.”  When you are closing in on a deal, use this technique to take a few final nibbles and get a deal with which you are really happy.  An example might be, “If I purchase this widget at that price, I need you to throw in free widget washing for a year.”

Have patience

Having patience is a usually necessary for getting a great deal.  As mentioned, maintaining that walk away power is very important.  So, maintain it, and use it when you need to.

Remember, it’s your money, no one can force you to buy a product at a price with which you are not happy.  When I was negotiating one of our cars a few years back, I remember telling myself this over and over.  You get into a car dealership and they try to make you feel bad about not giving them their price and all this and that…so remember this tip.

Give it a try

As I mentioned previously, you don’t really have anything to lose by asking for a better deal.  I admit that I don’t negotiate often.  Usually, I’ll sit through a session like this and get all fired up about negotiating.  I’ll then go out and try it and almost always have success…but over time I just stop trying it.

The last major thing I negotiated took place a few years ago when we needed to get a liner put into our chimney.  The quote I had was $2400.  So, I exercised some patience and waited about 5 months until March, which is typically  a time that chimney companies don’t have a lot of work.  I simply called up the company and asked them if they’d be willing to do the work for $2000 if I paid cash.  The receptionist put me on hold for about two minutes, and came back and said, “sure, when would you like us to come to do the work?”  It was a pretty simple thing to do to save $400!

My advice to you is to try negotiating some stuff – get over your fear and your concern that you are ripping the other party off.  If you are being honest with them, there’s no need to feel guilt or shame over it.  Remember that no one can force you to buy a product and, on the flip side, you can’t force anyone to sell you something.  If they are not comfortable with your offer, they can always say “no.”  So try it – you just might be pleasantly surprised by the result!

Check out my previous FPU posts:

Fear the Catalog!

September 11, 2008 · Filed Under Finances, Random · 3 Comments 

As I returned home the other day from dropping my daughter off at school and spending the morning working at a local restaurant, my son rushed out to greet me in the garage. Ahhh, that’s so nice, you say, your son is happy to see you….well, not quite. As he ran past me toward the car, he asked "is the catalog in the car?"

The object of his desire was a simple catalog that we received the day before. In fact, I don’t have any idea what the name of the catalog was. All I know is that the catalog had "stuff" in it that, apparently, four year old boys and six years old girls really like….a lot.

Everything is so shiny and pretty

photo by futureshape

This all started the day before when my son burst into my office with catalog in hand. He proceeded to sit down on the floor and show me the numerous items that he had circled. He had chosen all manner of stuff (most if it really expensive for a four year old boy) was circled from this thing. When he (finally) got to the end, he said, "ok, so you go ahead and order these for me, ok!" and went to walk out. "Hold on a minute!" I said and tried to explain to him how these catalogs actually work. "You have to pay for this stuff." "Can I use my money?" "You only have 2 dollars." (He had recently splurged on a pirate set and drained his Bank of Mom & Dad account). "Is 2 dollars enough?" "No."

This behavior went on for days

Preceding the story above was the trip to school for my daughter and her friend. My daughter took the catalog with her and she and her friend paged through it the entire way to school asking each other what they liked and wanted. Then my son spent way too much time looking through this thing and talking about it over the next few days. He so wants what is in it that he is now beside himself because Christmas doesn’t come for another 4 months – "I just can’t wait until Christmas!" (yes, we told him he could ask for some of the things for Christmas).

I can not believe the influence this catalog has had on them

photo by raindog808

I am shocked by this random catalog’s effect on our family. We talk about these items A LOT now. But let me frame this for you – this is really out of ordinary behavior for them. Sure, they ask for stuff when we’re out, but they don’t constantly obsess over "stuff" and continually ask how long until Christmas (at least, not four months out!) In fact, I have overheard both of my older two kids at various times tell each other "you don’t need it, you just want it."

The more you look at catalogs, the more you want to buy

In the book I’m currently reading, Your Money Counts by Howard Dayton (of Crown Financial), it states that "the more you look at catalogs and magazines, the more you spend." This may seem obvious to you or it may seem ridiculous, but I can tell you that I have seen it first hand in my kids this past week. Normally frugal kids (every penny my daughter finds she immediately gives to me and says "put it in my account") were transformed to caring a lot more about buying things merely by the presence of the catalog.

Personally, I really agree with this statement. I am usually fairly good at avoiding coveting, but when I look through a Performance Bike catalog, or walk through Home Depot, or drive through a nice neighborhood, I am all of the sudden not as content as I was a few minutes before. This is just something to keep in mind when you’re planning your budget or trying to cut expenses (or when you’re just bored). If you’re having trouble with your spending, don’t participate in the activities that will trigger more spending: Don’t watch TV, don’t read catalogs, don’t go to the mall. For the most part, I think that "out of sight, out of mind" really works for some spending issues.

Random only-somewhat related thought stuck on the end of the post

Yikes – a thought just popped into my mind: If you take the above statement as true, then how bad is it for a married man to be looking through a Victoria’s Secret catalog? That’s like a double whammy of spending more and entertaining impure thoughts all at the same time.

photo credits: futureshape and raindog808
PS: Wow – Chuck Norris has his own catalog?!?

Book Review: Your Money or Your Life

July 31, 2008 · Filed Under Book Reviews · 5 Comments 

Transforming Your Relationship with Money and Achieving Financial Independence

by Joe Dominguez & Vicki Robin

BFN Book Reviews

Over the years, I have found it tremendously helpful to see what other people with similar interests have been reading on the topics of personal finance. That is why I am periodically publishing my own reviews. I hope to give you a brief overview of the book and the authors, touch on the good and bad in the book, and finally, give you my personal recommendation for whether you should borrow the book, buy the book, or act like the book doesn’t exist. Click here to continue reading…

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