Career 
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How to Negotiate A Severance Package

Unemployed Storm TrooperA friend of mine was recently let go from her job of many years (she recently wrote about it in a two-part series, part one and part two). It’s been difficult watching the news and hearing about the millions of jobs lost in the last year but until one of your friends is fired, it really doesn’t sink in how weak our economy is. It’s one thing to see your 401(k) lose value, an account I can’t touch for forty years, it’s another to see one of your friends lose their job.

The first thing that came to my mind was whether or not she could negotiate a better severance package. She explained that because her employer was a non-profit, she had no legal recourse. I was surprised but upon further research, I learned that there are no laws specifically covering severance. There are laws that cover unfair termination, such as the Fair Labor Standards Act and similar state laws, and severance is mostly seen as a way to placate employees so they don’t consider filing a lawsuit. However, despite this, you can still negotiate a severance package.

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 Cars 
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How To Buy A Car (Without Getting Screwed)

If you’ve done any reading on how to negotiate with dealers when buying a car, you’ll probably recognize all the steps mention in this tutorial by Rob Gruhl at Ignite Seattle. The problem with negotiating at a dealership isn’t that we don’t know the steps, it’s sticking to them when we have our defense worn down after one BS line after another. The best bit of advice in the video is that you need to bring a friend when you go to the dealership.

The video is only five minutes long but here’s an even briefer recap his tips:

  • Plan on two full weekends – Time is your friend, not theirs.
  • Get financing from your bank – You are unlikely to get a good deal from the dealer, this way you go into it knowing your amount, rate, and other terms.
  • Don’t sell your used car to them – There is no reason they should give you a good deal, Gruhl says they are looking to make $1200-$1800 off your car. Sell on craigslist, donate, or sell on ebay.
  • Pick at least three different cars – That way you have options and aren’t married to a single model
  • Test drive them – So you know how they handle, but don’t buy it after test drive.
  • Invoice is useless – Dealers know this, it’s a distraction, and competitive bidding is the real discriminator. Call 8-10 dealerships and bid them against one another. They will say they don’t do it but tell them that you will buy from them if they give you the best price today (they will bid, they always will).
  • Get the “drive it off the lot” price – That’s the real number, with all the fees, taxes, etc. added in.
  • Confirm availability – Make sure they have it, VIN number, and walk through the options
  • The first visit – You will probably leave because something bad will happen (car is gone or some other BS); Tell them “Sorry we had a deal, see ya.”
  • The second visit – Bring patience and a friend, they will try to tire you out, stick to your guns.
  • Don’t sign until it’s all set up
  • The Back Room – ignore those add ons, high margin stuff you can buy elsewhere, “Just say no”

Yes, all those tips were jam packed into five minutes. If you’re going to buy a car, or even thinking about buying a car, watch the video and you won’t be disappointed.


 Personal Finance 
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50 Financial Skills Every Person Needs To Know

Popular Mechanics created a list of 100 Skills Every man Should Know, which naturally gravitated towards DIY/physical skills like jump starting a car and split firewood. The Frisky listed 30 Skills Every Woman Should Have Before Turning 30, which actually touched on more than physical skills (though #12 is physical :) ), with a handful of financial skills (#17 – #20).

This isn’t a checklist of things you need to necessarily do in your life, it’s just a list of things that you should know how to do (in case the need arises).

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 Frugal Living 
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Remember to Pinch Pounds Too

A while back I discussed how you could save some cash by cutting just one cup of coffee a week and by brownbagging it just one day a week. That’s when, in chatting with Paid Twice, she joking said “yeah… all these years of home brew coffee and packing lunches – explains why we’re broke. :) ” She said it tongue in cheek but it’s a legitimate concern. So many people budget to a penny, diligently track their expenses, yet find themselves behind the eight ball and I suspect it has to do with expenses on the other side of the spectrum – the big ticket items. (I suspect this because that’s what happened to me!)

With respect to frugality, I see the world in two different categories. The first category is for those big ticket items where savings can be significant. Big ticket items are marked by lower frequency but high savings potential, such as a car. The second category are those smaller day to day expenses where there is a much higher frequency of expenses but lower potential for savings. Many times we focus on the small items because we deal with them every day but get panicky or pressured when we start talking major expenses, but those big expenses are the ones where the big savings are too.

Unfortunately, big ticket items aren’t things you can change overnight and they also tend to be more stressful. I recognize that. The two big ticket items most individuals have to pay for are housing, either renting or buying, and a mode of transportation, usually a car. The two are generally marked with higher levels of stress (what’s more stressful, buying a house or making your own detergent? duh!) in part because of the higher dollar values but also because of time constraints. With housing, you’re usually under the gun because you have to move by a certain date according to your lease or some other agreement. With a car, you’re usually under the gun because you need a car ASAP and the whole car sales business is a pressure cooker anyway.

So, how do you counter it? Remove the pressure and reduce those expenses as best as possible.

Remove the Pressure

Sales Pressure: With either a car or a house, there will always be a measure of sales pressure on the part of the agent or the salesperson. It’ll be far worse with a car dealership salesperson because they know they might not get you the next time in so they want you to buy now. Combat this by doing one thing… never sign anything the first time you walk into a place. If you meant to go test drive a bunch of cars, don’t buy that day. Always sleep on a decision and always get a second and third opinion from people you believe are both trustworthy and knowledgeable. You can save yourself from making plenty of bad decisions if you sleep on it and ask for second-party opinions.

Housing: You know when your lease will expire, so start your housing search as early as possible. If you’re buying, start it several months in advance of your move. If you’re going to rent again from another place, start a couple months in advance of your move. Chances are, if you’re renting, even if you can’t find another place to live, you can always go month-to-month on your lease and pay a small premium. Paying an extra hundred dollars a month for one month is far better than rushing into another lease or even a 30 year mortgage!

Car: What’s the worst thing that can happen if you don’t buy a car and your car is kaput? At best, you’re inconveniencing yourself and perhaps friends and family that agree to drive you around. At worst, you rent a car at about thirty or forty bucks a day until you settle on a car. What’s worse, overpaying a few thousand on a car or shelling out for a rental? There is no pressure to buy a car as soon as possible.

Reduce the Costs

The topic of how to reduce the costs of housing and a car, at the tactical level, is way too complex to go into in a few paragraphs here. If you want to know the best tactics for negotiating down the price of a car or a home/rental, you can find plenty of information online . I will however say a few words about how I view homes and cars from a philosophical level and I’m interested in hearing your opinion as well.

Housing: When I rented, I saw my apartment as a temporary location for, at most, a few years. Since it was temporary and I wasn’t building a long term solution, I tried to spend as little as possible on my housing. My end game was to buy a house, not rent a swank apartment, so I never painted or put up pictures. The point was to pay as little as possible so that I could put as much as possible towards a down-payment. To this end, I spent two years renting, always had the same roommate, and we tried to keep costs down as low as possible – I never paid more than $600 a month for rent. I’ve know people who have spent $1200 to $1500 on single bedroom or studio apartments because they wanted someplace nice. That’s $600 to $900 a month that person can’t put towards something else (which is perfectly alright, we all have our own tastes). However, if you are looking to save money, you have to make a lot of detergent to recover $600-$900 a month.

Car: My car gets me from A-to-B and I want it to be affordable, reliable, and fuel efficient. I know some people like to buy cars because it projects a certain image, they want to be able to drive their co-workers or bosses around in a nice ride, but luckily I never worked in industries where that mattered or could affect my future job growth.

Total Cost Considerations: This post is getting a little long winded but I wanted to throw in one last point about total cost. When you sign up for a house or a car, you’re signing up for years and years. A lease is often for twelve months minimum. When you make these purchases, remember to consider the monthly costs as well as the initial costs.


 Shopping 
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Know Thy Enemy: Understand the Salesperson’s Tools

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not your enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” – From translation of Sun Tzu’s Art of War

In this article, I’m going to try to identify a salesperson’s tools, why they work, and hopefully what you can do to defend against them whenever you’re going to make a purchase. These aren’t tricks or scams, these are just solid sales techniques that have been proven to work. I won’t go over things that are outright scams, like baiting and switching or “the one you want is out of stock, how about this one” or “whoops I added this up wrong and it’s way too high, lemme see how you react,” just the ones that are generally honest and just good tactics.

Throughout reading all this, remember one truism: Salespeople need to eat. They will try their hardest to sell you something and they will persist if you give them any reason to believe a sale can be made. Being polite is one thing, but being honest and forthright is better because it allows a salesperson to work on a customer willing to buy. If you’ve made a decision not to buy, make it very very clear and the salesperson should understand. If they don’t, they won’t be in sales for long! If they do, they’ll be thankful to be able to get a good excuse and move onto someone who will turn into a commission check.

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 Shopping 
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Never Give In To Sales Pressure & False Urgency

Salespeople come in all sizes, shapes, colors and products, but they all come in with the same playbook and the same tactics. One of those tactics, whether it’s your traditional car salesman or a less-salesperson-like lender or loan officer, is the utilization of pressure to get you to act. The pressure may come in the form of an artificial sense of urgency brought on by a “spectacular” offer that you must accept within the next fifteen minutes or it could be psychological pressure preying on your fear of the unknown. Whatever it is, remember that you are holding onto the money, they are holding onto the product, and they want you to trade on their terms. Don’t do it because you feel it’s a “chance of a lifetime” because it isn’t… remember it is their profession to sell.

Have you ever heard of the story of someone who went into a store to buy one product and left with a more expensive product because the salesperson “talked them into it” as if they had no control in the matter? Did the salesman prey on their fear of the unknown to pressure them into doing something they didn’t want to? How about the loan officer who, in giving great terms, gets a borrower to borrow more than they originally intended? (“It’s such a great rate, you might as well take out as much as you can to take advantage! I’ve never seen such a low rate, you must have a spotless credit history!”)

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 The Home 
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Avoid Housing Bidding Wars

MusingMoney keyed me in on this little story about how two different home selling strategies yielded two different results and is the topic of the third chapter of my Home Buying Autopsy. When you go to buy a house, keep your eye on the prize and your hand on your wallet. This is the same as when you’re buying your next trinket on Ebay, always avoid a bidding war – the seller’s best friend.

In the story, one seller listed a $400k home at $450k while their neighbors listed it at $395k. The $395k yielded more foot traffic and eventually created a bidding war with the sale price resting at $425k. The $400k languished and eventually sold for $410k. Moral? Bidding wars only benefit the seller.

I almost fell prey to this twice in my home buying process. At the time, and even now, the housing market in the Baltimore-Washington area is piping hot as supply has yet to catch up with demand. I had always planned to spend between $250k and $300k for a home, that’s all my wallet could bear. When the time came to put down an offer on a home listed at $290k, I submitted an offer for $290k with an escalation up to $300k, my limit. The seller countered and I escalated up to $310k, a full ten thousand bucks over my limit! I was in a bidding war! The seller came back and said that the other offer was for more but by then my girlfriend had talked some sense into me and I backed out.

The second time was in the house I ultimately purchased. Listed at $270k, (a lowball listing to generate foot traffic into the house, comparables were selling for $300+ in the area) we offered $280k with an escalation up to $295k. The seller’s agent told us the competition had $350k in cash and she wanted to know if we wanted to increase our offer. The key point we used was the knowledge that the seller’s wanted to stay another two months, something competition wasn’t willing to agree to (and probably why the price was lower). I was tempted (briefly) to jack up our offer but thought better of it… turns out that the other buyer offered $330k! The biggest mistake their agent made was telling me I had no chance.

Therefore, the next time you’re buying something, including a house, remember not to go beyond your preset limits for the sake of winning. There is an infinite supply of homes and with time and diligence; you will find the right one in the right price range. There is no such thing as a perfect house if it will cost you more than you want to spend.


 The Home 
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Always Negotiate Mortgage Lender’s Fees

In this second installment of my home buying autopsy series, I’ll take a look back at my dealings with my lender, Equitable Trust Mortgage. I knew that I could negotiate some of the fees with my lender but I felt pressure from the sellers to close the sale within two weeks, which by all accounts is very difficult to do. Since my only benchmark at the time were the closing costs associated with a loan from LendingTree and Equitable Trust’s closing costs were significantly lower ($500 vs. $995), I had no reason to think about shopping around.

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