One Simple Trick to Saving Money...On Everything
When you think about ways to grow your wealth, the strategies usually fall into one of two categories:
Earn more money
Spend less money
I’m always trying to tackle the “how to grow your wealth” question from several different angles, but lately, I’ve been most interested in how to save more money.
After several years of foolishly spending more money than I should, I’m working to minimize my outflows so I can put more money into savings and investments.
Between the ages of 23 and 25, I made some stupid money decisions, including:
Spending hundreds of dollars every month at bars and restaurants
Buying a $40,000 truck – my monthly payment was $500, not to mention hundreds each month for gas
Buying a brand new Harley Davidson on which I spent about $18,000
Sure, I had fun at the bars, and I loved my truck and my bike, but I was basically throwing money into a black hole.
But I sure did look pretty cool
After reading Rich Dad, Poor Dad, and growing up a little bit, I finally realized I needed to stop pouring my extra money into liabilities and start funding cash producing assets.
I tightened up my bar and restaurant spending, sold my motorcycle, and traded my truck in for a Honda Civic. Those three actions alone put more than $500/month back into my pocket.
But I didn’t want to stop there. I read Ramit Sethi’s book, I Will Teach You to Be Rich, and Chris Voss’ book, Never Split the Difference, and I was pretty sure I could use their negotiation techniques to save even more money.
The key to paying less is asking for a better price
Many people don’t know it, but some businesses have a discount built into their pricing. They don’t advertise the discount, but all you have to do is ask.
Once you commit to making this practice a habit, it will save you money, and it will help you get comfortable being uncomfortable.
It will show you that rejection isn’t that bad.
Here’s how I did it.
Saving on tax prep
One of the first places I tried this strategy was with my accountant.
Since I own rental properties, my tax return is a bit more complicated than normal. I have neither the time nor the expertise to file my return, so my business partner and I contracted with a CPA firm.
We used the firm without complaint for one year, but then they changed their pricing model, causing our cost to increase significantly.
We received our engagement agreement to find the cost had increased by 22%! Our tax preparation was going to cost us $1,800 each.
I responded with a polite, detailed, well thought out response, requesting to pay $1,475 each.
I used this number as a low anchor, a technique Voss talks about in his book where you use a very low or very high number to start a negotiation in your favor.
To my surprise, I received a response two days later telling me that they agreed to a price of $1,475! No negotiation. No pain. Just a simple email asking a question.
Cost savings on my taxes: $325
Saving on education
As one of the strategies I’m using to grow my blog, I’m working on building my Twitter following.
I’ve had Twitter for a long time, but I never used it much, and I didn’t know the first thing about how to grow a following.
In my browsing, I found an interesting guy, Ed Latimore, who I enjoy following on Twitter.
He writes engaging tweets, and I frequently find myself “liking”or re-tweeting his content.
One day, he tweeted about his e-book, Engagement is the New Cocaine, a how-to guide on growing a Twitter following.
I clicked on the link and saw the book was $47 – far more than I’ve paid for any book since college textbooks.
This guy has over 70k Twitter followers, so he’s clearly onto something. I wanted to read the book, but there was no way I was going to pay $47 for it.
I figured, “What the hell. Let me shoot him a message.”
All I had to do was ask.
I set a low anchor – free. Ed came back with another negotiation technique discussed in Voss’ book, a calibrated question.
This is a way to say no without actually saying no. Ed wasn’t going to give me the book for free, but by asking a calibrated question, he was able to gain more information, and make me feel like I was in control.
He who has learned to disagree without being disagreeable has discovered the most valuable secret of negotiation.
Robert Estabrook
I came back with a price I thought was reasonable, a price I’ve paid for plenty of other books, and he agreed.
The situation was a win/win, which is the outcome you’re looking for in any negotiation. Both sides should be happy.
I highly recommend his book. By making a half-hearted attempt at implementing Latimore's techniques, my follower count has more than doubled. I can only imagine the results if I followed his advice to the T.
Cost savings on the book: $32
Saving on car maintenance
As I mentioned earlier, I traded my big expensive truck fora small affordable Civic.
Several months ago, it was time for the first oil change, so I stopped in to the Honda shop to have it done.
I also rotate my tires on every oil change – I think the extra miles you get out of them justifies the cost – so the total bill was about $60.
I walked into the office to pay my bill, sat down, and made some small talk with the sales guy. When he told me the cost, I politely asked if he could possibly give me a discount.
Without hesitation, he knocked $10 off the bill.
Saving $10 isn’t really a game changer, but developing the habit of asking and negotiating for a discount can be.
On the other hand, $10 off a $60 bill is a 16% discount. If I could negotiate that deal on big ticket car repairs, imagine how the savings would add up.
The process doesn’t have to be stressful or intimidating. It can be as easy as two minutes of small talk, followed by a simple ask – “any chance you could give me a discount on the service? I would really appreciate it.”
Cost savings on the oil change: $10
Saving on the cost of being an idiot
As my girlfriend could tell you, sometimes my brain is going in seven different directions at the same time.
Within the last couple months, I logged into my American Express account to make my monthly credit card payment. This statement by itself is slightly embarrassing, since I recommend automating all of your bill payments.
I entered the amount.
I entered the payment date.
I got to the “submit payment” screen.
And I got distracted.
Something caught my attention, I got up from the computer,and by the time I got back, I didn’t even remember the credit card payment.
Several days later, when I saw the $27 late payment fee on my account, I knew exactly what happened. I promptly made the payment and called AMEX customer service. The conversation went something like this:
“American Express customer service, how may I help you?”
“Hi, I’m a bit of a moron. I thought I made my credit card payment on time, but it turns out I didn’t. I just made the payment when I saw the late fee on my account. It was totally my fault. Any chance you could waive the fee for me?”
“No problem sir. I’m looking at your account and see that you’ve never missed a payment. We would be happy to reverse the late fee for you.”
Five minutes on the phone saved me $27 dollars. Totally worth it.
Just one word of caution – they usually don’t do this for you more than once, which is why I still recommend automating your bill payments.
Cost savings on the idiot tax: $27
When this strategy doesn't work
One of the big things Ramit Sethi talks about is negotiating your rent. As rent is by far my largest monthly expense, I decided I should give it a try.
Several months ago, I received the paperwork to renew my lease for the 5th time. After four years of being a model tenant, and having a lease renewal in the middle of slow renting season, I figured there was no better time than now to negotiate.
The rent was going up from $1,850 to $1,900 per month, so I decided to use a low anchor of $1,600.
I wrote an email using one of Ramit Sethi’s scripts as a guide, and sent it to the management company.
As you can see, there is no reply to the email. I followed up twice and finally received a phone call from Betty.
Betty is a tough bird. She began the call by saying, “Let me take a look at your file. Ok I see your email, and you want a rent reduction? We don’t do that.”
I explained the points in my email again and explained how I understand turnover costs, being a landlord myself.
Betty listened silently. Then she responded again. “The rent is the rent. We don’t give reductions.”
It didn’t take a master negotiator to realize that this wasn’t going well.
“Ok, that’s fair,” I responded. “How about the parking? Could you possibly take that off my rent?”
At this point Betty sounded annoyed when she said, “The rent is the rent, and the parking is the parking. It’s not changing.”
I’m not a skilled negotiator by any means. But I think Chris Voss himself would’ve struggled to get Betty to reduce the rent.
Feeling a bit defeated, I thanked her for her time and hung up the phone.
Then two weeks later I sent in my signed lease for another year. I’m pretty sure Betty knew I was bluffing.
Maybe you’re wondering why I shared this example, since it didn’t result in me saving any money.
My failure to achieve the outcome I wanted, and the ultimate result, is exactly why I’m sharing this story.
If I had been successful in my request, I would’ve saved $3,600 in rent over the next year. That is a huge amount of money to save from a couple emails and a phone call.
But I failed in my negotiations, and what happened?
Nothing. Absolutely nothing happened.
They didn’t kick me out of my apartment for asking for lower rent. I didn’t face public humiliation and embarrassment. Nobody hung my picture in the lobby with a sign that said, “This guy is a cheap son of a bitch.”
Wrapping up
If you haven’t figured this out yet, there is no downside to asking for a discount – especially in situations where you stand to gain a huge amount of money.
The more you ask, the more comfortable you become with asking. The more you receive a positive response, the more money you save.
The more you receive a negative response, the more comfortable you become with rejection because you realize it’s not that bad.
The more comfortable you are with rejection, the more confident you are, and it leads to a positive feedback loop of you receiving favorable outcomes just by virtue of having the balls to ask for them.
Just from the four examples above where I received a favorable response, I saved $394.
I’m working every day to employ these strategies and to continue working as hard to guard my money as I do to earn it.
Where does this fit into your life? Where are you leaving money on the table? Where will you ask for a discount?
Let me know on Twitter @josephcwells
