Archives For May 2010

       Negotiation skills are a powerful asset in life. Understanding how to negotiate will help you get raises and promotions, get a better deal, and get out of paying stupid fees. These five steps will help you learn how to negotiate better and smarter.

1. Prepare

       Before you begin negotiating (meeting with your boss or calling a company), take time to prepare for the negotiation. Think about what you want to accomplish and make it a concrete goal. “I want a 10% raise” is better than “I want more money”.

       Then, take some time to look at it from the other person’s point of view. Why should they be willing to give you what you want? In the case of getting a raise, have you proven yourself to be a valuable asset to the company? If you’re dealing with a business you buy from, have you been a customer for a long time or is it difficult to get new customers?

       The key is to list your accomplishments and reasons why you should get what you want. If you’ve saved your company money or taken on new responsibilities, write down exactly what you have done. Good examples would be “saved the company $20,000 a year by reducing waste in …” or “supervising ten more employees than last year”. Be ready to justify your request with reasons that will appeal to the other person.

       If you’ve been hit with a bogus fee, review your situation and be ready to explain what happened and why you don’t think you should be charged. If you were misinformed by an employee of the company, make that clear when you call. This is also why it’s smart to keep a record of when and to whom you speak when you call a company. You can easily reference the conversation and the person if a problem arises in the future.

2. Choose the Right Time

       Timing can greatly help your changes of negotiating successfully. If you’re asking for a raise, try to do it right after you finished a major accomplishment or as you take on new responsibilities. Your boss will have a difficult time overlooking the current circumstances – making it easier to give you a raise.

       Trying to get a better deal on your cell phone? Wait until your contract is just about to expire. (This works for other bills, too.) Businesses often spend quite a bit of money to get customers, so they’ll often do what they can to keep you. Negotiating when you’ll have the option to cancel gives you more power.

3. Be Firm & Confident but Polite

       Even if you are nervous or unsure, act confident and be firm as you negotiate. Weakness (real or perceived) puts the negotiating power back in the other person’s hands, so avoid it at all costs. This simply means you should not act timid when making your request. If you know you deserve a raise, act like it!

       However, this doesn’t mean you should be rude. Nobody likes a jerk. If you become hostile or impolite, people may refuse your request simply because they don’t like you. Be pleasant, kind, and patient and you will be rewarded.

       Another strategy is to use praise to your advantage. When negotiating a raise, show that you enjoy working there and are aligned with the company’s interest. If you’re trying to get a good deal with a company, comment on how you’ve enjoyed using their product in the past. Let people know you appreciate their time and help and they’ll be happy to help you again.

4. Be Ready to Respond

       You should be ready to respond to any number of reactions you get. If the answer is yes, then express your thanks. If the person needs to get someone else’s approval, let them know you appreciate their support. If the answer is no, things get a little trickier.

       If you’re trying to lower your bills or get rid of bogus fees, don’t give up at the first “no”. Restate one of your reasons for why you should get what you’re asking and follow that up with a leading question. Here’s an example: “Well, I’ve been a customer for 3 years and I’d hate to have to switch to [competitor]. What can you do to help me lower my bill (or get this fee waived)?” Do not follow up with a question that can be easily answered with a “yes” or “no”. Push for a “what else” or “how” type question rather than simply saying “Are you sure?” or “OK”.

       Dealing with your employer is a bit different because you don’t want to be so pushy you lose your job. If you think your boss is being unreasonable in denying your raise (i.e., you actually do deserve it), don’t be afraid to ask for more details and insist on your accomplishments once again. Be polite but firm. “After saving the company $25,000/year and increasing efficiency by 15%, a 10% raise is a reasonable award. In addition, comparable positions pay 20% more than my current salary so it is still good for the company.”

       If your boss still won’t (or can’t) budge, offer some alternatives that might not cost more money but are still beneficial to you. Increased vacation time, flexible hours, or the option to telecommute one day a week are a few examples. If these don’t go over well, ask for concrete goals you can achieve to earn a raise and get an appointment to renegotiate in a few months.

5. Be Ready to Walk Away

       Finally, you must be prepared to walk away if necessary. If a company won’t offer you a discount, let them know you can get a better deal elsewhere (be specific) and thank them for their time. That’s often enough to get what you ask for right away (but you shouldn’t abuse it).

       If you are significantly underpaid, work very hard, and have not been able to get a raise, be ready to leave your employer and go elsewhere. I wouldn’t use this as a negotiation tactic though. Even if your current employer offers to increase your salary, they’ll know you aren’t loyal to the company and they may look to replace you. Your best bet is to start looking for a new job without letting your current boss know. Turn in your resignation after you have a firm offer from a new employer and move on.

These Tips Do Work!

       If you think these tips don’t work, I’m proof that they do. Using these strategies, I’ve gotten 10% raises, lowered several of my bills, and had bogus fees waived several times. Again, preparation and confidence are key. You must know why you deserve to get what you’re asking for and be willing to push for it if necessary. Many times, simply asking will get what you want because so many people fail to take that step.

       Have you successfully negotiated a raise, lower bills, or fee waivers? Share your tips and stories in the comments!

Why Budgeting Fails

Corey —  May 17, 2010

       I recently watched a series of interesting videos on TED.com about the psychology of motivation and decisions. One in particular got me to thinking about why budgeting fails. Dan Ariely, author of Predictably Irrational, talked about his experience as a burn victim and the research he later did on pain. His question was whether it’s better to rip off bandages faster (high intensity of pain, short duration) or take them off slower (lower intensity, longer duration).

       What he found after extensive experimentation was that our brains don’t seem to register or remember duration as much as intensity. In other words, slower removal of bandages is better. You can hear him talk about this in the first few minutes of his talk. I’ve included the video below if you want to watch right now.

How Does This Relate to Budgeting?

       In thinking about Dan’s findings, I wondered if this could be why budgeting fails. Generally, we approach budgeting like ripping off a bandage. We go through every category of our budget ripping a little (or a lot) off of each area all at once. Effectively, we’re making our budgets extremely intense in terms of the pain we experience. Since we seek to avoid pain, we often abandon our attempt at budgeting and proclaim that it doesn’t work.

An Alternative Approach

       What if we made budgeting a bit more like slowly taking off the bandage? What if we kept the pain low (or at least a bit lower) but extended the time it takes? Here’s an example of how this would work.

       First, you’d need to track your spending so you know exactly where your money is going. I’m not talking to the penny – rounded to the nearest dollar is good enough. (I’ve written in the past about tracking your spending.)

       Next, take a look over your spending for the past month (or 3 months). Pick one or two areas you want to focus on saving money (or earning more). You can find ways to cut back, get a better deal, or replace it with something else that costs less. The key is that you keep the pain level low by only focusing on a little bit of “deprivation” at a time. The same approach can be used for increasing your earnings. Rather than going from 40 hours a week to 60, you can find incremental ways to improve your income.

       Then, you repeat this process over and over. Track your spending, review it, pick a couple areas to cut back on, and repeat. It will take you longer to get to your final destination (that unrealistic budget you tried but failed at), but you’ll actually get there rather than giving up.

       I don’t think this would be a smart method for someone in crisis mode. If your spending significantly exceeds your income, you obviously need to take drastic measures right away (cutting back or earning more). But for many people who aren’t in crisis mode, this approach may be much more effective and successful than the all-at-once, cut-back-everywhere budgeting method.

       I don’t think this is the only reason traditional budgeting fails. Wojciech at Fiscal Fizzle talked about ten reasons why budgets fail and highlights some other pitfalls you may have to consider.

Your Take

       What do you think about this idea? Have you used this model for improving your financial situation? Did it work for you? Do you think it’s too idealistic or foolish? What am I missing? Can it be improved? Share your thoughts in the comments and let me know.

       Cheap meals don’t have to be unhealthy. They don’t have to taste bad either. By following a few simple guidelines, you can plan cheap and healthy meals that are delicious.

Beans & Rice: The Main Characters

       OK, this isn’t limited to just beans and rice. The point is that the main core of a cheap and healthy meal is usually going to be legumes and grains. Good legumes include navy, pinto, black, and kidney beans, peas, lentils, chickpeas, lima beans, and soybeans. Good grains include barley, brown rice (not white!), buckwheat, corn, millet, oats, quinoa, rye, spelt, and whole wheat. You can pick just about anything in those two lists and they’re going to be pretty cheap and quite healthy (buy in bulk and raw – no instant rice or pre-cooked beans). You’ll want to combine at least one legume with one grain to get a complete protein.

       If you need inspiration for recipes that center around beans & rice (or other grains), consider ethnic foods from all over the world. Nearly every single culture has some kind of variation on this theme, which means you can find a nearly endless variety of cheap and healthy meals. One I like is sauce pois (bean sauce) with rice – common in Haiti. It’s basically just cooked, seasoned beans that have been pureed into a sauce served over rice.

Vegetables, Fruits, Nuts, and Seeds: The Supporting Cast

       To create a truly healthy meal, you’ll want to add vegetables, fruits, nuts, or seeds to your menu. Your “normal” vegetables and fruits can almost always be found cheaply. Check for fresh options first, then frozen, and finally canned if you must. Try to focus on the vegetables and fruits that are in season. Here’s a good list of cheap vegetables and fruits and when they’re in season to use as a guide, but you’ll probably need to adjust it for your area.

       You can’t go wrong with most fruits, but focus on the best vegetables to get the biggest nutritional bang for your buck. Broccoli and spinach are great examples of foods that can be quite cheap but have tons of health benefits.

       Don’t be afraid to go outside your grocery store to search for the cheapest options either. Farmer’s markets and pick your own farms can be great, cheaper alternatives to the supermarket.

Eggs, Dairy, Seafood, and Meats: The Intermission

       Eggs, dairy products, seafood, and meats are typically the centerpiece of the “American” meal. But if you want to eat cheap and healthy, you have to break out of this mindset. For complete proteins at a low cost, eggs are your best bet. For calcium, you’ll want to look to milk and dairy products. (I like cottage cheese for this. It’s fairly cheap but contains concentrated amounts of the beneficial stuff found in milk.) Finally, for B vitamins (especially B-12) and a few other things, seafood and meats are your friend.

       You can include small portions of the foods in this category and still keep your meals cheap. By using them to accent your main characters (the beans & rice), you’ll get flavor and nutrition while keeping it cheap and healthy. You don’t have to exclude these delicious foods to eat cheap and healthy, but you’ll need to use them with discretion.

Spices & Herbs: The Musical Numbers

       Spices and herbs will liven up any dish (especially the cheap ones) to help you create something tasty. Focus on those you use often rather than buying up a bunch of exotic spices you don’t like. Fresh herbs can actually be grown quite easily in small pots inside providing you with a cheap source of flavor all year round. Additionally, many spices and herbs have health benefits of their own, so that’s just a bonus.

Processed and Non-local Foods: Don’t Even Go There

       Most foods in this category are either bad for you or expensive. Yes, some processed foods are “cheap”, but it’s also possible to eat healthy while keeping your costs low. Considering the health risks of consuming mainly processed foods, it’s not worth taking your chances.

       Non-local foods have to be shipped hundreds or thousands of miles, thus increasing the cost. Most non-local foods are going to be more expensive than a local alternative with the exception of bananas and a few other items. (Though that’s probably due to the low-paid labor used to harvest them.) Many people also choose local foods for environmental reasons which can save on hidden costs we don’t quite see yet.

Your Take

       Do you have hints and tips on how to plan cheap and healthy meals? Share them in the comments!

       Kevin at Out of Your Rut just published a guest post I wrote for him called “A Better Way to Budget?“. I won’t be posting today, so you can check that out if you’d like. I’ll have a post up on Monday explaining what brought this approach to my mind. It’s not new or novel, but I think there’s good science behind why it might work. And it’s closely related to some of the concepts in Your Money or Your Life (which was a coincidence since I didn’t start reading that book until after I wrote these articles).

Preaching Christ Crucified

Corey —  May 11, 2010

       I want to apologize.

       I want to apologize for anything I have taught that did not point to Christ crucified.

       If I have written about giving without emphasizing that giving does not make you righteous, I have missed the point. If I have ever implied that your generosity will please God, I have been wrong. If I have suggested that you can find contentment through your own power, I was in error.

       All too often in “Christian” personal finance (and Christianity in general), we fail to emphasize the fact that Christ accomplished all on the Cross. We can put heavy burdens on readers and listeners because we may teach that your choices and your determination will glorify God.

       There is a choice you must make. But that choice is not to change your heart of greed to a heart of generosity, your heart of laziness to a heart of diligence, or your heart of covetousness to a heart of contentment.

       The only choice you must make is to accept the forgiveness, grace, and mercy that Christ offers us through His death on the Cross for our sins. Until you accept that Gift, nothing will make you right before God – in your finances or any other area of your life.

       Tithing will not make you holy. Generous, sacrificial giving will not make you righteous. Contentment will not bring you salvation. Diligence cannot save your soul. Only Christ can.

       The evidence of a Christ-filled life is not in your choosing to be generous. Generosity flows out of your choosing to follow Christ. Contentment does not come by your choosing to live simply and reject consumerism. Contentment comes from your choosing to focus solely on Christ and the rich Gift He gives.

       If I ever teach that you will glorify God through your finances by doing certain things, living a certain way, or giving a certain amount, I am wrong. You will glorify God through your finances as Christ lives in you and pours out His love through your life. Contentment, diligence, stewardship, and generosity will result as you look to Jesus’ example and follow Him – not as you make specific choices and fulfill certain objectives.

       Do not be misled by what I am saying. Faith without works is certainly dead. How can our response to Jesus be anything other than contentment, diligence, stewardship, and generosity? But neither are we saved by our works. And it is not our power that produces these good things within us. It is Jesus who saves us and the power of God’s Spirit that produces whatever good we see in our lives. This does not relieve us from responsibility for our actions. We are called to seek holy lives in light of our new life in Christ. If we are not following and obeying Jesus, how can we call ourselves His disciples?

       I ask you to keep me honest to this truth. If you see me teach anything other than Christ crucified, call me out on it! If I teach that you will please God by doing specific things, remind me that God is pleased when we listen to His Son and follow Him. Yes, this requires action on our part. But it is action that flows out of faith (faith that works) – not action that precedes faith or salvation. Show me my error and refute it. Do not allow me to continue in a lie or lead others in it either. I pray that we may all remember how powerless and fallen we are and that we will learn to rely only on the salvation Jesus gives and the example He taught and lived.

       22 For Jews ask for signs, Greeks seek after wisdom, 23 but we preach Christ crucified; a stumbling block to Jews, and foolishness to Greeks, 24 but to those who are called, both Jews and Greeks, Christ is the power of God and the wisdom of God. 25 Because the foolishness of God is wiser than men, and the weakness of God is stronger than men.

1 Corinthians 1:22-25 (WEB)

       In our last Investing Basics article, we talked about stocks. Today we’ll talk about bonds. Later, we’ll look at mutual funds, options, futures, and short-term savings options.

What Is a Bond?

       As I explained in the post about securities, a bond represents debt. Bonds are long-term debt contracts issued by corporations and governments. The bondholder has a right to receive interest plus the return of the bond’s face value at maturity (when the bond is due). Face value just means the stated value of the bond.

       If you purchased a $1,000 bond paying 10% interest in semiannual payments, you’d get $50 every six months. When the bond matures, you’d get your $1,000 back.

Interest Rate Changes

       Investors can choose to buy or sell bonds before they mature. Depending on whether the current interest rate is higher or lower than the bond’s interest rate, investors will pay less than or more than face value. If the current interest rate is higher, investors would pay less than face value for a bond because they could get higher returns by purchasing new bonds. If the current interest rate is lower, investors would pay more than face value because they can’t get a higher return from new bonds.

       Changes in interest rates do not matter if you hold the bond to maturity because you’ll get the stated interest rate plus the face value back. You don’t care if interest rates change from month to month because you’ve already locked in your interest rate. And you don’t care if the current value of your bond changes from month to month because you’re going to keep your bond until it matures (and you get your money back). Changes in interest rates only matter when you might sell the bond before it matures. In this case, the value of a bond can increase or decrease similar to the way stock prices change. (However, changes in bond prices are directly tied to changes in interest rates.)

Risk

       Bonds are considered safer than stocks because you’re taking less risk. If a company liquidates or goes bankrupt, bondholders get paid back before stockholders because they have a contract with the company. Because they’re less risky, bonds have historically returned less than stocks over the long term.

Special Features

       A certain type of bond called a “convertible” bond lets you convert the bond into a specific number of stock shares if you choose. These bonds provide interest (although usually a lower rate than regular bonds) while giving you a chance to participate in the appreciation of the company’s stock.

       Finally, some bonds are “callable”. This simply means that the issuer can choose to repay the bond before it matures. This can be good or bad depending on your situation. There are several aspects to these bonds that we can’t cover here, so we’ll look at them later when we get into more advanced investing topics.

       In the next article, we’ll look at mutual funds. Make sure you sign up for free updates to Provident Planning if you want to learn more!

       A few weeks ago, Michael Covington and I had an email conversation about giving. Michael had been thinking about how we should respond to solicitations from charities, but we ended up discussing giving to everyone who asks as well.

       Jesus was quite clear that we should give generously. He taught us to give to the poor & needy – even if they are our enemies. And in Luke 6:30, Jesus tells us to give to everyone who asks:

       Give to everyone who asks you, and don’t ask him who takes away your goods to give them back again.

Luke 6:30 (WEB)
Also found in Matthew 5:42.

       Note: “Ask” can also be translated as “beg” and it often is translated that way.

       It’s quite clear that we should give to everyone who asks. The question, then, is how do we apply this in our lives as we seek to follow Jesus? Does He mean that we should give to every charity organization that sends us a postcard or letter or calls us on the phone? Does He mean that we should give exactly what a person asks from us? These are important questions.

Charities & Organizations

       We do not have a special and clear Biblical obligation to give to every charity or organization that writes to us, calls us, or otherwise asks us for support. While many charities are indeed doing great work to alleviate the suffering of the poor and the injustice of the oppressed, we must not feel guilty for refusing to support some charities and not others. In fact, many of the fundraising phone calls you may receive are run by telemarketers who take a cut of your donation (sometimes up to 80%!). Your donations can be more effective by diligently searching for responsible organizations and giving directly to them.

       Neither should we ignore requests from charities or organizations. God could be using that opportunity to raise our awareness to a need He wants us to meet. When it comes to charities and organizations, our approach should be one of prayerful, intentional, planned, and Spirit-led giving. Following such a pattern can help us remain confident that we are fulfilling God’s will for our giving and allow us to refuse giving to those organizations God has not laid on our hearts.

       However, we should remain open to new or different needs and revisit our giving to organizations often. When you are presented with a need from a charity, tell them you will consider their request and pray about God’s desire for your giving. Let them know you will contact them if you feel God calling you to give to their organization. Then seek God in prayer for wisdom and discernment.

Individuals

       In stark contrast, the Bible is quite clear that those who wish to follow Jesus and honor God must always be ready to help a person in need. Jesus’ teachings revolved around compassion and care for each other – but especially for the poor. The Old Testament clearly lays out that even under the Law Jews were to give to the poor & needy, the orphans, the widows, and strangers (foreigners in the land). We should not be surprised that Jesus requires the same from His disciples. Compassion and mercy are trademarks of God’s love.

       So when individuals ask us to give to them, our first response must be one of generosity and compassion. However, there may be times when it is not wise to give exactly what someone requests. In those cases, we must seek discernment through the Spirit. A few examples will illustrate my point.

       1. The person is not needy. Should we give to the rich? The Bible is clear that giving to the poor is commendable – not the rich. Those who are not truly in need should not be given whatever they ask. A simple scenario makes this point clear. Your teenager asks you for a new iPod. Should you give it to them based solely on Jesus’ words in Luke 6:30? Or someone who has all his needs met asks you for $100. Should you give it to him even when you know there are others who need it more?

       2. The person will cause harm to themselves. Should we give money to an alcoholic or drug addict who will very likely use it to fuel their addiction? This does not mean we should not give. It merely means that money may not be the best gift. Which is more compassionate? To give $20, or to give 2 hours? We can give our time by becoming the person’s friend, meeting their needs directly (taking them to eat, getting them a place to stay, etc.), or taking them to a ministry specializing in breaking their addiction and helping them recover. Compassion doesn’t blindly throw money at those who ask. Compassion seeks to alleviate suffering.

       3. The person is being dishonest. While there are dishonest people out there panhandling and begging for money, we must be very cautious about refusing to give based on this idea. However, it is often easy to separate the honest from the liars. Simply ask a few questions about what the person needs. If they’re asking for money, what do they need it for? Then see if they’ll let you fill that need directly (buying gas at the gas station, eating a meal with them, taking them to a shelter or ministry, etc.). The con men will not let you do this (most times). They want cash and cash only. Those who are truly in need will not refuse your help.

Your Take

       I know I may sound like I’m ignoring Jesus’ teaching. He said to give to anyone who asks. He did not give us any qualifiers. However, to ignore the rest of Scripture and the rest of Jesus’ teaching would be quite foolish. I fully understand the idea that we should err on the side of generosity, and that is the approach I try to take. But we must not trade feelings of righteousness and being good with our responsibility to carefully handle what God has given us. By blindly giving to those who are not in need we steal from those who truly need help. Wisdom, discernment, and generosity can work together quite well – and they must.

       Giving does not always mean money. But when we refuse to give (for one of the reasons above or others), we must ask ourselves “What is my motive/reason for not giving to this person?” If we are refusing out of selfishness or greed, we are clearly at fault. If we are refusing because of a Biblical teaching, we must consider whether love and mercy should triumph in this case.

       What are your thoughts on the issue? Am I just stingy? Did I miss the point of Jesus’ teaching? Bonus: I’ll even give you some ammo for opposing my ideas. In Luke 6:35, Jesus says to do all these things because God is kind toward the unthankful and the evil. Does that mean we should give without any “qualifications” at all? Let me know what you think in the comments!