This week’s lesson was about how to find big bargains. I thought this was kind of a funny topic because the last thing people in debt need to be doing is shopping. But then I realized that the lessons are starting to transition to topics that will be used after the class becomes debt free. Learning how to get big bargains is a great way to save money and become debt free, as long as you’re getting bargains on things you need. Dave didn’t say this, but I will. A bargain, no matter how big, is never a bargain if you don’t need it or won’t use it. I know plenty of people who find “deals” all the time on stuff that just ends up cluttering up their house. That kind of bargain hunting is counterproductive.
Much of the lesson focused on negotiating for deals. Negotiating is definitely a learned skill and something that most people in the U.S. rarely use. Dave says that negotiation is a way of life in almost every culture except ours. He’s right. I’ve traveled enough to know that in most other places in the world you are expected to haggle, at least a little bit. It can be intimidating to try it, but the payoff can be huge.
Dave has several rules for negotiating including, always tell the truth, use the power of cash, be willing to walk away, shut up, use the phrase, “That’s not good enough,” and use the “If I do X, you’ll do Y” technique. Telling the truth applies to both buying and selling. It’s simply a good practice to be honest in your dealings with others. Don’t lie about the condition of items or your circumstances to try to get better prices. Chances are that if you do, it will come back to bite you at some point.
Most of these rules are self explanatory. Cash will almost always get you a better deal because the seller doesn’t have to worry about your credit or bounced checks. Being willing to walk away results in a better deal because the seller knows he has to make a good offer to get you to buy. “Shut up” means be quiet and let the seller talk himself down in price. Most people are so uncomfortable with silence that they will babble to fill it which usually results in free add-ons or lower prices. The “If I do X, you’ll do Y” technique works like this: You tell the seller that, for example, if you buy his car today with cash, then he’ll throw in the upgraded stereo for free. Or, if you handle the transportation of your new stove yourself and don’t require the retailer’s free delivery service, that they will knock another ten percent off the price. It’s a way of sweetening the deal for your side without really hurting the seller.
Dave is big on making sure that any negotiation results in a win-win situation. He has a point. You don’t want to take advantage of someone when you’re negotiating and you don’t want to be unfair (at least you shouldn’t). You want to get the best price while still allowing the seller to make a fair profit. You don’t want to lie or cheat. You simply want to find a way to get what you want while making sure that the seller gets what he wants, too. There’s always a middle ground and you should work on finding it and not get hung up on screwing the other party.
Dave also talks about having patience when you’re shopping and being willing to consider a variety of options. The more focused you are on getting something quickly and getting only a specific feature set, the less bargaining power you have. Deals sometimes take a while to show up and the great deal may not meet every single criteria you want. But if you can be patient and flexible, you can score some good deals.
Finally he talks about where to find deals. Knowing where to find deals is as much of a learned skill as negotiating. You can find deals through individual sellers, estate and yard sales, couponing, flea markets, rebates, pawn shops, auctions (online and off), classified ads/Craigslist/Freecycle, and consignment sales. You can also find deals through foreclosures and repo lots, but you have to be careful not to get burned.
We don’t come into the world magically knowing where the deals are. However, after several years of looking for deals, you start to get a sense of when and where deals can be found. You start to know when clearance sales start, when the thrift store sets out new merchandise, and which stores in town have the best prices. You also know who will negotiate and who won’t. You know where to find listings of estate sales and which used vendors are reputable. Dave points out that truly wealthy people hunt for deals and negotiate all the time. They’ve honed this skill. It’s a way of life for them and it’s how they save so much money. If you want to be wealthy, deal hunting is a skill you need to master.
The FPU member’s website has a couple of extra tips on bargain hunting including buying at the end of a season, buying things that are older models rather than the newest models, comparison shopping, and using eBay (although you have to be very careful not to get burned these days). These are not Earth shattering tips, but they do add to the bargain hunter’s arsenal of tricks. He also suggests two questions to ask. First, “Is that your best offer?” This one usually opens the door to negotiation. The second, “Can I have that?” sometimes opens the door to freebies or stuff that wasn’t previously for sale such as display items or things that were considered trash. I got a laser jet printer once by asking if I could have it. I was at a client site and I saw it piled up in a corner with a lot of other electronics awaiting disposal. It only needed a new toner cartridge. They were getting rid of it because it was an older model and they didn’t want to spend the money on a new cartridge since they were buying new printers. The client said, “Sure. Take it.” I took it home, bought a new cartridge, and I still use it to this day. All because I asked, “Can I have that?”
The small group discussion was pretty lively this week. Everyone, it seems, likes to talk about bargain hunting and shopping. We talked about all the ways to find deals, ranging from couponing, to buying online, to using cash back sites when shopping online. Most of the people in the group are, because of this class, learning about things like price matching, sales cycles, couponing, and buying used for the first time. The world of bargains is new to them and it’s fun to watch them get excited about saving money. As someone who has lived in bargain land for a long time, this is refreshing to see.
We talked about why most people are afraid of negotiating for deals. Common reasons included embarrassment, fear of seeming rude, the hassle of tracking down a manager, and that it’s too confrontational. We talked about all of these reasons and pretty much came to the conclusion that the worst anyone can do is laugh at us or call us weird and that we can live with that. We tried role playing some negotiations so that people could actually try it out. Turns out, most of the group was pretty good at negotiating.
Of course everyone had a story about a great bargain, but the one that topped the list was the guy who got a great new car for $300. He bought it from a neighbor. It had belonged to the neighbor’s kid, but the kid had gotten into some trouble and ended up in jail. The neighbor just hated seeing the car in the driveway all the time. He wouldn’t drive it because it was all pimped out. Rather than removing the decor, he just wanted to sell it to punish the kid so that when he got out of jail he wouldn’t have a car. So the guy in our class happened by on the day the for sale sign went up. He asked how much the guy wanted. The guy said he just wanted to get rid of it. Our guy said he thought about it and decided to offer $300 cash. He knew he’d have to do some work to remove the decor and have the car repainted (it was a metallic grape purple) so he didn’t want to put too much into it. He also didn’t need it, so he wasn’t about to put in a lot of money to buy something he didn’t need. It was a good car with low mileage and he just thought it’d make a decent extra car. He thought the guy would be insulted, but instead the guy took the cash, pulled off the for sale sign and gave him the keys. Moral of the story: It can’t hurt to ask.
Most people in the group admitted that, up to this point, they had very rarely asked for deals when shopping. However, they were inspired to try it now. I’ve never been a great negotiator personally, but I will ask for money off sometimes. Sometimes it works and sometimes it doesn’t. I never ask for small things though. I won’t go into Best Buy and ask if the $15 DVD can be had for $10, for example. I only try for deals on bigger things like appliances, cars, etc. I know I need to work on my negotiating skills. I get flustered in major retailers, but I do better at yard sales and with individuals. I guess it seems ruder or more like I’m bothering someone when I’m in a major retailer and it trips me up. Wheeling and dealing is a skill and it can be learned.
Homework Roundup: Ah, a very easy week. We only have to read a little bit in Financial Peace Revisited and tell a friend about FPU (again). I’ve got that covered, I think. I don’t even have anything from prior weeks that carried over to this week, so I get a week to relax a little bit.
Depressingly, I haven’t been able to reduce my ad exposure that much. I said last week that I wanted to try, but I’m learning that advertising is so pervasive in our culture that I cannot escape. Even though I don’t watch much TV, I’m still constantly tripping over billboards, banner ads, ads in buses, ads that come in the mail, and magazine ads. Now that I’m looking for it I’m realizing just how much we really do see a day and it’s kind of scary. I’ve about concluded that, short of moving into a cave, there’s no real way to reduce ad exposure by much, once you give up most TV. It’s still everywhere.
Lastly, if you can’t attend Financial Peace University yourself, consider getting the DVD Home Study Kit (9 Week Course) 2012 Release. It sells for between $185.00 and $200.00 on Amazon and since you don’t have to attend any seminars the home study kit is an efficient use of your time.
This is a series of posts about what you will find in Dave Ramsey’s Financial Peace University course. You can find the previous posts here: week one — week two — week three — week four — week five — week six — week seven