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Negotiation Skills: How to Increase Your Salary, Lower Your Bills, & Avoid Bogus Fees

Corey — May 18, 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!

In Budgeting, Debt, Frugality, Insurance, Psychology, Work

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.

In Budgeting, Psychology

Guest Post on Budgeting at Out of Your Rut

Corey — May 12, 2010

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).

In Budgeting

Extreme Early Retirement or Extreme Generosity?

Corey — April 29, 2010

I recently discovered Jacob at Early Retirement Extreme. I’m not sure how I got there – maybe from this post at Monevator – but I’m glad I did.

Jacob is a bit of an anomaly in our culture – he’s a retired 34 year old, but he’s not rich (based on typical standards). He was able to retire early by saving 70-80% of his income for five years. He did not make a ton of money during that time. I think his salary was around $40,000-50,000/year while he was saving. He simply lived very frugally and saved the rest. Now, he still lives frugally but no longer needs to work to cover his expenses. Despite the fact that he doesn’t need to work, he does – and he makes enough to cover his expenses.

Cheap Living

Jacob lives on about $7,000 per year. He’s able to do this because he’s learned to live cheaply – especially when it comes to the major areas of most budgets (housing, transportation, food, etc.). He doesn’t have a car, finds cheap/free forms of entertainment, and eats healthy meals with little to no meat. He currently lives in an RV with his wife, but he admits it’s not a necessary choice to duplicate his results.

Should We Retire Extremely Early?

I don’t highlight Jacob as an example to be followed for extreme early retirement. I don’t think early retirement as a goal in and of itself as admirable or desirable for a Christian. (I also don’t dismiss it as a goal because I can see how God could use a person in this situation for full-time volunteer work or missionary work – a self-funded missionary if you will.) I’m highlighting Jacob and his choices because he offers insights that Christians can use to question the cultural norms and make choices that can lead to extreme generosity.

For example, Jacob’s views on housing, insurance, and “sacrifice” greatly coincide with my own. (I don’t really agree with him on investing, but that’s irrelevant.) He doesn’t see money as necessary to have fun or live comfortably. He avoids waste. He learns new skills so he can make and do more stuff himself. His approach to living cheaply so he could retire extremely early can be adapted by Christians who want to give generously.

If you want to get a better feeling for what Jacob did and why, check out his frequently asked questions, about himself page, and about Early Retirement Extreme. You can also see his best posts of 2008 and 2009.

How Can We Use Jacob’s Examples to Honor God?

What I ask is that you read his articles from the perspective of how they can help you better serve God in your finances. Unless God has a specific purpose for you retiring early, that’s probably not a goal that will glorify Him. But we can use the same ideas Jacob used to enable extreme generosity in our lives by reducing our expenses and questioning the cultural norms. If you find something particularly insightful or helpful on his website, please feel free to share it in the comments below.

In Budgeting, Contentment, Frugality, Giving, Retirement, Work

Advice to a Young Professional

Corey — April 22, 2010

In 1748, Benjamin Franklin wrote a great little letter entitled Advice to a Young Tradesman. It’s packed with wise advice, but the language is outdated for most readers today. So without much ado, here’s an updated version of Ben Franklin’s “Advice to a Young Tradesman”.

TO MY FRIEND, Y.P.:

You asked me for my advice, so I’ve written these tips for you. They worked well for me, and they’ll work for you if you’ll follow them.

Don’t forget, time is money. Let’s say you can earn $200/day. Now if you sit and watch TV for half the day, you can’t count the $3 you spent for cable as your only expense. You’ve really spent – actually, you wasted – $100 besides that.

Don’t forget, credit is money. If a man is late collecting the money I owe him, he’s giving me the interest that can be earned on it. This extra interest can add up if we’re talking about a lot of money.

Don’t forget, money can compound. Money can give birth to money, and its babies can give birth to more, and so on. A hundred dollars used well can become two hundred. That two hundred can become four hundred, and so on until you have ten thousand dollars. The more money you have, the more you can make each time you use it well. Then your profits will increase faster and faster. But if you kill the goose that lays the golden eggs, you destroy all the eggs you would have gotten in the future. If you murder a hundred dollars, you destroy all that it might have produced, even ten thousand dollars.

Don’t forget, that $1,825 a year is only $5 a day. For that small amount (which you can easily waste in time or money) a man with good credit could cover the interest on a personal loan of $20,000. That much money put to quick work by a diligent man gives a great head start.

Remember this saying, “The man who pays his loans on time owns another man’s bank account.” If you always pay on time and as you promised, you’ll never have trouble borrowing more money. This can be very useful. After hard work and frugality, nothing brings more success to a young man than punctuality and justice in all he does. So never keep borrowed money an hour longer than you promised. A bad mark on your credit history could close the bank for a long time.

Pay attention to even the smallest things that can affect your credit. If your creditor knows you’re working hard, he’ll give you a break. But if he sees that you’re being lazy and not trying to pay him back, he’ll be demanding you pay him back all of his money tomorrow.

Your diligent work and long hours will show that you remember what you owe. It also makes you appear to be a careful and honest man, and that will improve your credit as well.

Don’t live like everything you have belongs to you. Too many people with a credit card make this mistake. To avoid it, carefully track your income and expenses for several months. If you take the time at the beginning to track even the smallest things, you’ll have great results. Here’s why. You’ll see how tiny amounts pile up into larger amounts of money. Then you’ll know where you’ve wasted money and how you can save it in the future with very little inconvenience.

Here’s what it boils down to. The way to wealth, if you really want to know it, is as clear as the way to Target. It depends mainly on just two things – diligent work and frugality. Waste neither time nor money. Make the best use of both. Without hard work and frugality you’ll get nowhere. But with them, you can go anywhere. The man who gets all he can honestly and saves all he gets (except what he needs to live) will definitely become rich. Provided, of course, that God (whom everyone should ask for blessing on their honest work) doesn’t have other plans for that man.

An Old Pro

In Budgeting, Debt, Frugality, Investing, Miscellaneous, Saving, Work

You Don’t Need to Be an Expert to Be Successful

Corey — April 20, 2010

While knowledge isn’t really a hindrance to success, you don’t need to know everything to accomplish your goals. After you reach a basic understanding of an area you want to be successful in, you need to start taking action. Continuing your learning after that point is wise, too. But if you never act on what you learn, you’ll never be successful.

First, Learn the Basics

This is especially true in personal finance. You don’t have to be a seasoned financial planner to begin finding success. You don’t even need to spend a ton of time to understand the basics. They’re simple. Spend less. Earn more. Save and invest. Be wise and cautious when making purchases (goods, services, or investments). Plan ahead. Don’t pay things you don’t have to (like extra taxes). And so on. A basic education is all you need to start finding success in your personal finances.

You don’t need an accounting degree to make a budget. You don’t have to be Warren Buffet to start investing. You don’t have to go to law school to get your estate documents in place.

Then, Take Action

Success in personal finance is not necessarily about knowing all the right answers. It’s about taking action. Those who only read about the benefits of budgeting will never be as successful as those who actually try to make a budget and stick to it. This is true even if the doers are not successful the first time.

You can learn by reading about the experiences of others – but only so much. Until you start creating your own experiences, the information will just be knowledge in your head. You must start using it yourself!

Don’t think I’m discounting the value of learning, education, and research. To be truly successful, you’ll have to keep learning. But you can’t get started on the road to success unless you follow a pattern of learning, doing, learning, doing, and so on.

Avoid Danger Areas!

I’ll end with a few cautions especially true in personal finance. In some areas of personal finance, there are unscrupulous people who will try to take advantage of your lack of education. Insurance, investing, and debt are the most common places you’ll run into this, but you can really find it anywhere. Here’s the key: Before doing something, make sure you’re aware of the possible problems/pitfalls and educate yourself on how to avoid them.

Here’s an example. In investing and insurance, you must be aware of how advisors and salesmen get paid. If it’s commissions, know what conflicts of interest might exist. In other words, learn how people might try to rip you off and be on the lookout for those techniques.

Even though there are risks to the learn, do, learn method, you can avoid most major mistakes by learning first about the danger areas and how to avoid them. In personal finance, be aware of those who earn commissions, learn the math of debt, and read the academic research on investing.

Now Do Something!!!

So get out there and start doing the needed things to achieve success. Stop reading about budgeting and do it! Stop worrying about having enough for retirement and start saving! Stop dreaming of starting your own business and do it! You’re never going to get anywhere until you take action.

P.S. I think I wrote this as much for me as for anyone else. I have the curse of perfectionism, and I must battle it every day. There is no such thing as perfect in this world. Only God is perfect. So I need to stop worrying about doing everything perfectly and just start doing. What about you?

In Budgeting, Debt, Estate Planning, Frugality, Insurance, Investing, Retirement, Saving, Taxes, Work

How to Find $50 a Month to Give to Charity with Minimal Effort

Corey — February 19, 2010

This is a guest post from the Editor of VoucherCodes.co.uk, a site offering voucher codes and printable vouchers to help you save more money.

In the current climate it is hard for many to get by. All of our budgets seem to have been slashed, and what’s left over for the end of the month for luxuries has all but disappeared. Giving to charity each month can therefore seem a bit of a hardship, but it is ironically at this time that it is needed so much. The recent earthquake in Haiti has provided an all too clear signal of the need for charitable donations. With a few personal finance tips, you can put aside a large part of your monthly budget therefore freeing up more resources for charity.

Budget!

The first thing to do is to know exactly where you stand. As has already been pointed out on Provident Planning, a site such as Mint offers free financial software that can show you exactly where your money is going each month. This can be an excellent tool, but it can be difficult to work with this as a household tool. In a dual income household, communication is especially important. The whole family will have to sit down together in order to work out their expenditure and to plan for the months ahead. If you have children this can be a great chance to educate them on how to manage money and to set a great example.

Save on Groceries

To help with the family planning further you can log on to Netmums, a UK community of mothers and download their weekly meal planner – this is just as applicable for a US family. Any shopping trip can then be more focused around what is essential. Supermarkets are designed to bombard you with information encourage you to make impulse purchases. They have become very sophisticated in their marketing (ever noticed how the premium brands are at eye level?). If at all possible, it can be better to leave the kids at home when shopping – they are usually much more persuadable to making unnecessary purchases and are no doubt very adept at persuading you as well!

Cut Back on Your Energy Bills

It is also essential to cut the amount of energy you are using in your home. With just a few tricks you can save lots of money. Head over to the Energy Savings Trust website and take their free home energy check to ensure you are not frittering away your hard earned cash in wasted energy each month.

Use Coupons

Coupons have also become an online phenomenon in 2009 – and if you’re not using them in 2010 you will really be missing out. Ever been prompted when buying online to enter a voucher code (or promo code or something along these lines)? Well a simple Google search for “Coupons” will provide a huge collection of coupon sites where you can find the correct text to enter to get the relevant discount. These can usually knock $20 off the weekly shop. [Paul’s note: I like RetailMeNot for this. I’ve saved a lot with that site.]

Don’t Waste Money When You’re on Vacation

In the end we all deserve to have to have a break from counting the pennies, but this does not mean we want to be ripped off when going on holiday. If we easily reduce the amount we fritter away, it means we can spare a little more from the holiday fund. A little local knowledge can be found in the online Time Out guides – they provide comprehensive schedules of the events coming up in most of the major world cities. Booking in advance you can usually make huge savings and avoid inflated “at the door” prices. You can also find great advice on non-touristy restaurants to save further. These combined can cut your travel budget by almost half painlessly.

I hope these tips show that with a small bit of thinking we can be more charitable each month without breaking the bank!

This has been a guest post from the Editor of VoucherCodes.co.uk. Be sure to check out their site if you live in or will be visiting the UK. I’m sure you’ll find some ways to save money!

In Budgeting, Frugality, Giving, Stewardship

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