Don’t Spend Money You Haven’t Earned

It is that time of year again, when we gather with friends and family around a large feast and discuss why we are thankful. While you take this much needed time for reflection, know that there is a well-developed plot against you that is about to unfold. It is what many Americans have come to know as Black Friday. Black Friday is the day after Thanksgiving that marks what some say is the official start of the holiday shopping seasoning. The term “black” refers to retailers making a profit or “being in the black”.  The day was designed to separate you from your money.

Studies have shown that Black Friday is one of the busiest shopping days of the year. According to the National Retail Federation,  in 2013 consumers spent $57.4 billion dollars during the Black Friday weekend. What makes Black Friday so different from the other 364 days of the year? The lure of rock bottom prices, steals and deals that retailers claim you will only see on this one day. People line up and camp out at stores, hours even days before the Friday store opening, to ensure their chances to purchase that “must-have”.

I am not sure if this is capitalism at its best or at its worst. I don’t think I need to say (but I will), that $57.4 billion dollars is a heck of a lot of money. I wonder how much of that was actual money that consumers had versus credit they used. I know it is easy to be lured in and to think that you are actually saving money with Black Friday deals, however it is only a deal if you have the money to make the purchase.

Get out of the habit of spending money that you have yet to earn. That is exactly what is happening when you use credit cards with the intention of paying them off at a later date. After paying the interest that accrued, I guarantee you that the purchase wasn’t much of a bargain when it is all said and done.

I say this from experience because I would shop on Black Friday religiously, and used my credit cards without hesitation. I would swipe my cards without any immediate consequences and rave about the money I “saved”. Once I received the credit card bills, reality set in. I, like many other credit card holders, didn’t have the money to pay off my balances. I then struggled to figure out how to pay these new bills with my existing expenses.

As the saying goes, “When you know better, you do better”. I no longer make this common financial mistake.

Going into debt to get more “stuff” simply isn’t worth it. Being able to sleep at night without financial worries, is far more valuable than the last electronic or a new pair of jeans.

Remember, if it is not in your budget, you can’t afford it.

Happy Holidays and remember to be financially responsible!

Don’t Be Afraid to Negotiate

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Negotiation is a powerful tool that consumers do not use enough. Salespeople know the majority of buyers would rather not engage in haggling over price. Initially, it can be uncomfortable talking about cost and your unwillingness to pay the stated amount. I would shy away from negotiating because I didn’t want to appear as if I couldn’t afford the item I wanted to buy. I was actually concerned about how the salesperson would view me. One day I realized this was a bunch of psychological nonsense. There is a psychology to selling and I was playing right into the hands of the person that wanted to take me for every dime possible. I will offer you this useful advice, if you are scared of negotiating….get over it!

You work hard for your money, don’t give it away easily. As I said, there is psychology to selling goods and services. It is all designed to create a transaction that is most beneficial for the seller. Use the tool of negotiation to make the playing field a little more even. Negotiating is a skill but anyone can master it. It will require that you do a little homework, but the small amount of time you spend doing research can potentially save you a significant amount of money. You will need to gather information from a few different sellers/providers about the price of the goods or services that you are looking to purchase. If the seller/provider that you choose to do business with doesn’t have the lowest price, use the information you gathered to negotiate a better deal.

There are a few rules to remember when negotiating. First, have a predetermined amount that you are willing to spend. Always exhibit confidence and stand firm in your decisions. Lastly, if you don’t think you are getting the best deal or what you want, don’t be afraid to walk away.

There are certain situations that are notorious for negotiating, like buying a car. There are other situations where negotiating can be used as well, such as having work done around your house. I recently tried this myself and was very happy with the outcome.

I needed to have the fence that surrounds my backyard replaced. When having any type of work done it is best to get three estimates so that you can make an informed decision. That is exactly what I did.   I was shocked by the huge difference in the estimates I received, but decided to use it to my advantage.

The three estimates were:

Company A-$3,008

Company B-$2,554

Company C- $1,925

I ruled out the estimate from Company A, because it was significantly higher than the other two. Even if I negotiated a lower price I thought it would still be inflated. I wanted to contract with Company B because I believed they would do the best work. Despite that, I couldn’t  ignore the $629 difference between them and Company C. I wasn’t going to do business with Company B unless we negotiated a lower price.

I contacted Company B via e-mail and attached the estimate I received from Company C. I explained I would like to do business with them but I received another estimate that was significantly lower. I asked that we split the difference between the two estimates and contract for $2,239. I received an e-mail back from Company B, stating that Company C neglected to include the $150 cost of a necessary permit in their estimate. Based on that Company B stated they would do the job for $2,314.

This prompted me to do a little more research and I found out my township didn’t require a permit for the type of fence I was going to have installed. I e-mailed Company B back with this information and requested that the full amount of the permit be removed from their estimate. My request was granted and I was very pleased when we agreed on a final price of $2,155. That was $399 off the original estimate I was given.

I saved all that money because I wasn’t scared to negotiate. I did my homework and I went into the discussions prepared. I did not cave when I received resistance to my first counter-offer. Like with any skill, you will get better and more comfortable with negotiating the more you practice. So don’t hesitate to use negotiation when you can. Don’t forget to share your stories with me. I would love to hear them!