In our society, there is an aversion to negotiating. For some reason, we feel as though it is rude to haggle and ask for a better price. However, it turns out that maybe we should be negotiating more. Two weeks ago, my husband and I got a 15% discount for an already-on-sale griddle for offering to take the display model. Of course, the item was out of stock. I doubt the display model trick would have worked as well if there were more griddles sitting on the shelf. And when we bought our dryer (and a couch later), we managed to successfully get free delivery and set-up (normally $50) on top of a discount of $75. Just for asking.

But it appears that I am in the minority. Consumer Reports has a graphic in the August 2009 issue that shows that only about a quarter of consumers try to negotiate. However, those who do negotiate tend to have a pretty good success rate:

Consumer Reports also offers these tips on how you can increase the chances that your haggling will prove successful:

1. Know store policy about discounts and matching deals, and research prices for similar items online and off.
2. Time your visit so that you arrive later in the month. Additionally, avoid times of the day that are busy. You want your salesperson to be thinking of his or her quota. And you want him or her to have the time to negotiate with you.
3. Show fixable flaws to the salesperson (or take the display model).
4. Avoid asking for a discount in front of others. Salespeople don’t want to have to give a discount to everyone who sees your successful negotiation.
5. Ask for a manager if the salesperson can’t deal.
6. Offer cash. In some cases, you can get a cash discount by asking. It means the business doesn’t have to pay a transaction fee for accepting your credit card.
7. Walk if you don’t get the deal. Part of negotiating is being able to walk away if you know you can get the same deal elsewhere. At the very least, when you walk you know you can get the same item for the same price someplace else.

For an interesting personal story about negotiating, Man Vs. Debt has a pretty cool story — and some good tips for beginning negotiators.

Do you haggle?

Numerous stories are popping up around the personal finance blogosphere with regard to the fact that Chase is raising the minimum payment on its credit cards. Last month, I wrote a post about things are about to get ugly for consumers in terms of their credit card accounts. So it was no surprise when that post (although a month old) saw this recent comment from a reader, Lisa:

Yesterday (6-25-2009) I got a notice saying my “minimum” monthly payment was going from 2% to 5%. That means my payment of $345.00 will start to be $810.00 in August. I will not be able to afford that. Mind you, I always pay my bills, don’t get late payment charges and the last time I checked, my credit score was like 797. Yes! I’m having financial troubles and am just barely holding on. This will send me over the edge - especially if my other credit cards follow this one. … HELP!

This is probably a common refrain across the nation right now. And, sadly, this new rule is aimed exactly at folks like Lisa. Chase will keep your minimum payment at 2%, if you agree to allow the company to raise your interest rate. The most common recipients of this change to credit card terms are those with low introductory rates of between 2.9% and 5.9%. You can see where this is going. The higher interest rate means Chase gets more money, and allowing you to keep the lower minimum means that you make payments for longer — meaning Chase gets more money. The way I see it (and every situation is different), there are three options here:

Option #1: Suck it up and make the new minimum payment

If you don’t agree to the higher interest rate (and keeping the current minimum payment), you will have to make the new payment. Since you have about a month, now is the time to do some serious surgery on your personal finances. Look over your budget and see where you can make cuts. This may include cuts to entertainment, cell phones, eating out and other negotiable expenses. (Note: Your housing payment, especially if you have a mortgage, is not negotiable. Always make sure this is paid.) Figure out which expenses you can cut and get it so you can make the new minimum payment. It’s not pleasant, but in the long run, you will save money in interest and pay off your debt faster.

Unfortunately, many people do not have the option to cut back so dramatically. The current economic conditions mean that some folks, due to cutbacks or layoffs at work, do not have the ability absorb an increase of the magnitude proposed. In such cases, you might go with:

Option #2: New loan

In some cases, it might be wise to get a new loan to cover the amount of what you owe. Pay off the credit card, and move on. Of course, you still have a loan. You might try switching to a different credit card with an introductory rate of between 0% and 3.99%. You could also consider getting a debt consolidation loan from somewhere. If you have reasonably good credit, you might be able to get a personal loan with an interest rate of between 7% and 12% from your bank or credit union. (While this is higher than your intro rate, it is likely to be a lower rate than what the credit card will offer you in exchange for keeping the minimum low.)

Another possibility is to use P2P lending, such as Prosper or Lending Club to help you lower your payments. In any case, though, I would think twice (or thrice) about using a home equity loan to secure your credit card payment. Do that last.

Option #3: Debt settlement or bankruptcy

If nothing seems to be working at all, you can reach for the final tool of desperation in these cases: Debt settlement or bankruptcy. You can usually reach settlement for unsecured debt, allowing you to pay less than you currently owe on your credit card. As an extreme last resort, bankruptcy can help lower your payments to something affordable (even though in recent years bankruptcy laws rarely allow you to walk away). In both cases, your credit will be shot, so it is not a decision to be taken lightly.

What will you do if your credit card minimum is raised?

image source: daylife

Disclaimer: I am not a financial professional. Any information you get from this site is not intended as advice. It is likely to be incomplete, and it may not apply to your individual circumstance. Do your own research, consider your situation and/or consult a professional before making money decisions.

There is a wealth of good personal finance reading out there in the blogosphere. Some of it is good common sense, and some of it is thought-provoking. Here are some of the things that caught my eye this week:

• Ten Things You Should Do When You Get Laid Off from Consumerism Commentary.
• Why Everybody Needs A Side Hustle from Frugal Dad.
• Be Successful by Learning Delayed Gratification from Bargaineering.
• Should There Be Mandatory Personal Finance Classes in High Schools? from Bible Money Matters.
• Find a Bank That Works For You from Green Panda Treehouse.
• Poor Money Choices Ruined My Parents’ Life from Lazy Man and Money.
• Best Free Events to Enjoy Almost Anywhere from Gather Little by Little.
• Things You Own End Up Owning You from My Two Dollars.
• 12 Common IRA Mistakes To Avoid from Good Financial Cents.
• 8 Ways A Recession Can Benefit You In The Long Run from Saving Advice.
• CDs vs. Bond Funds from The Oblivious Investor.
• Do You Keep Money Secrets From Your Spouse? from Free From Broke.
• 7 Tips for Talking to your Fiancé About Money from Mrs. Micah.

Keith over at Spend on Life sent me an email late last week to find out whether or not I had heard of a new service being offered by the site. It’s called Twinancial.

Twinancial pulls finance tweets off of Twitter, aggregating them in a way that makes it easy for you to read what is being said about a number of financial topics. It looks like a very interest service, although I haven’t delved too deeply into it. Twinancial offers RSS so that you can have the tweets delivered to your reader. Unfortunately, even though Twinancial uses Twitter, it does not offer a stream of tweets from those that Keith and the folks at Spend on Life are not subscribed to.

All in all, though, Twinancial is interesting for those who want to see what finance folks are tweeting about. Have you checked out this service? What do you think about Twinancial?

I’ve finally decided to joing the club: Weekly personal finance reading that I liked (in no particular order) especially this week. I hope it’s useful to you. Feel free to share your favorites in the comments.

• Tempted To Spend? Remove The Source of The Temptation at Bible Money Matters.
• On Spending Consciously at Cash Money Life.
• When Spending the Money is Worth the Cost at My Two Dollars.
• 10 Smart Student Credit Card Rules at Bargaineering.
• An Age-Based Plan For Teaching Kids About Money at Frugal Dad.
• Choosing a Withdrawal Rate for Your Retirement Assets at Good Financial Cents.
• How To Improve Your Productivity When Working From Home at Moolanomy.
• Confessions Of A Recovering Spendaholic at Free From Broke.
• How the Foot-In-The-Door Technique Costs You Money at The Simple Dollar.

Today, the Federal Reserve released its quarterly report on household wealth. According to MarketWatch, the report contained this information on net worth:

Household net worth fell at a 9.9% annual rate in the first three months of the year to $50.4 trillion, the lowest in more than four years. Net worth — assets minus liabilities — peaked at $64.4 trillion in the spring of 2007, the Fed said in its quarterly flow of funds report.

This is the 7th consecutive quarter that saw a decline in household wealth. While there are some bright spots in the report (more disposable income, lower credit card debt), the fact remains that many people are seeing their overall net worth decline. Home values are declining and investment portfolios are experiencing losses. Since many people have a great deal of their assets tied up in their homes, it is little surprise that the bursting of the real estate bubble has hit net worth. Additionally, with the losses to the stock market, the assets many had in their retirement accounts are dwindling. As I see it, there are two things you can do to reduce the psychological burdens that come with these losses:

1. View your primary residence as a purchase: Instead of thinking of your home as an investment, think of it as a long-term purchase. Consider the intangibles that come with your home (a yard for your kids, your own space, etc.).
2. Remember the long-term value of the stock market: Even though your retirement account may be suffering now, over time stocks gain overall. If you keep investing now, there is a good chance that in 10, 15, 0r 20 years, you will see significant gains.

This still doesn’t change the fact that your net worth may have fallen. However, if you stick with the sound personal finance fundamentals of reducing debt, building your savings, engaging in prudent investing and making your mortgage payments, your net worth will recover — and eventually thrive.

How has your net worth been affected by the recession?

image source: Wikimedia Commons

Some of you might be aware that I have a Major Client. This Major Client accounts for about 1/3 of my monthly income from my freelance writing business. However, what I’ve been suspecting might be coming for a couple months has finally arrived. My Major Client is cutting back rather dramatically. Although it’s better than I thought it would be; I thought I’d get dumped altogether. However, instead of doing that, they’re cutting me down to 45% of my current load. That’s a pretty substantial cut, though, from this Major Client.

I am fortunate in that this client pays a month ahead of time (due to the fact that the amounts of money involved are reasonably significant). I’ve been paid for this month’s work already, and the new contract takes effect July 1. So I have a little time to prepare for what I consider a freelance layoff. Here is what I have in terms of financial support during this time:

• Some savings to help cover costs, if necessary.
• We don’t spend all of our income each month, so there is a financial buffer.
• We have close to 6 months of food storage if it becomes necessary to economize by cutting back dramatically on the grocery bill.
• My parents are usually willing to provide a loan, and since their jobs are secure, it would be a last ditch effort. But better than using credit. My parents don’t charge interest.

What I plan to do in order to replace the lost income (or at least not add additional strain to our budget):

• Reduce the amount of sod for our yard. We’ll sod only the front and seed the back yard to save money. (Happily, the yard has already been budgeted in and is mostly paid for.)
• Look for new writing gigs.
• Write for a few paid content sites until things firm up. (I don’t particularly enjoy doing this — it’s like when I first graduated from college to be a…cashier. But you do what you have to do.)

I feel blessed, though. A lot of people do not have the luxury of nearly 22 days to prepare for a dramatic drop in income.

What would you do if you were faced with a drop in income?

image source: Esther_G via Flickr

Even with optimistic prognostications for economic recovery pouring in (thanks largely to yesterday’s payrolls report), don’t expect credit to be much easier to come by. The credit market has been heavily damaged, and financial institutions are not likely to forget that fact anytime soon. Indeed, credit has been tightening, and it is not likely to loosen for quite some time.

For those looking for a 0% balance transfer credit card, the news is pretty bad. You are unlikely to find a good deal on a credit card, and the debt management methods that usually follow such a course are likely to become less effective. Indeed, the tightening of credit card availability is likely to be further exacerbated by the recently passed Credit CARD Act of 2009. While the intentions are good, and many of the reforms are sorely needed, credit card issuers are likely to begin tightening their requirements, raising their fees and slashing rewards programs.

Getting a loan with the tighter credit requirements

You will still be able to get a loan, even with the tighter credit requirements. However, you may have to work a little harder for it. Whether you are trying to buy a car or purchase a home, here are some things to keep in mind:

• Down payment: The bigger your down payment, the better your rates — and your chances of getting approved in the first place. The larger your down payment, the smaller the amount being financed. And that is in your favor.
• Higher credit score: The credit score you need just to get approved for a loan has gone up. It is more difficult to get a bad credit loan, especially for a house. If you want approval, you need to work to improve your credit score. A higher score will also mean a lower interest rate.
• Income documentation: While it may not be terribly necessary for an auto purchase right now, income documentation is being emphasized more for a home mortgage loan. If you want to buy a house, the days of using unverified income are over. (At least for now. There’s a good chance that in 15 years or so things will be good enough that this whole messy cycle will repeat itself.)

This means that you need to prepare better if you are planning to make a large purchase on credit. Do what you can to improve your credit score, and save up money for a down payment. Those who are prepared are likely to still find credit at good rates. But the unprepared will either be rejected outright or will have to pay a premium to get approval.

It’s that time of year again. When the health insurance company sends me a letter telling me what my new premium will be. This year, my plan resulted in a $50 increase. Because costs keep rising. (Or the CEO of the company is finding his hundreds of million dollars in compensation is inadequate.)

At any rate, last year I received a rather long justification of rising rates — even for those of us who live healthy lifestyles and rarely use our insurance. This year’s justification was rather short, and included, once again the fact that, even though I have an individual plan, my costs go up along with the costs of those in my “group”. Basically, I’m subsidizing others’ poor health and, in some cases, bad health decisions. (Who says that we don’t have socialized health care? Society still pays for it, but not through a government apparatus. Of course, subsidizing it through insurance companies is much costlier to individuals, for the most part, than subsidizing it through the government through slightly higher taxes. But that’s another rant.)

This year, the nice, helpful folks at the insurance company sent me a cover telling me that they are here to help, and offering a very few ways that I might be able to reduce my costs.

I called to see what I could come up with. I did end up finding out about a plan that would reduce my health insurance premium to around $400 per month, rather than watching it jack up to $466 per month. The move will save me $792 on premiums in the coming year. I had to change my office visit co-pay, increasing it by $10, and agree to a $200 deductible for my prescriptions, but even with those changes, the new premium will save me $500 this year, over what the new premium would have been. I did have to raise my deductible as well, but that will only kick in if we have a major expense (which we haven’t yet), and the $2,500 deductible is something we can handle with our emergency fund — or the Health Savings Account I am thinking of opening.

I wanted an even higher deductible, but any plan with a higher deductible switches to deductible and then 20% coinsurance, which the lady explained to me means that I pay all of my out of pocket expenses and then 20% of all costs after the deductible is reached. After figuring out the fact that I would not reach the deductible this year, and would have to still pay a premium (only $20 less than the plan I chose), I realized that I would actually be paying more overall. Stupid cleft stick the insurance company catches you in. It sounded good at first, but when considering health insurance costs, it is important to factor in more than just the premium. You need to look at your out of pocket obligations and whether that 20% is more than the office visit co-pay. Hint: It usually is.

I wanted to get rid of maternity, but no plans with my company offer that, unless I go with an even more grotesque deductible/coinsurance plan. I looked for other plans from other health insurance companies (and will probably continue my search today), but none of them are really any better for the (rapidly dwindling, I discovered in my information) coverage I receive. In the end, I figure I’m kind of stuck. Sure, it’s crappy, but for all of my looking, I haven’t found anything much better.

Our health care is costlier than any other in the developed world, and it isn’t even the best. And, as my monthly premium goes up every year, I am continually reminded of the fact that in many cases, one insurance company is much like another. At least this year I’ve actually managed to reduce my premium. But it didn’t just happen. I had to go out there and look for a reduction. If I hadn’t taken the initiative, I would have had to swallow a $50 increase instead.

Has your health insurance premium been going up? How much? What are you doing to try and reduce your health insurance costs?

Over at Gather Little By Little, Stew asked his kids some questions about money, and shared their answers. I thought it was such a fun idea that I brought my son in and asked him 10 questions about money, just to see what he would say. My son is six, and it will be fun to see how his answers compare to Stew’s kids’. Of course, I worry that he’s done a better job of teaching his kids about money…

1. What is money? It’s dollar.
2. How do we get money? From the bank.
3. What do we use money for? Buying stuff.
4. How much money does mommy and daddy have? $1,000.
5. What is a person called who has lots of money? A bank.
6. What is a person called who doesn’t have much money? Me.
7. What is something good to spend money on? Buying food.
8. What is something not good to spend money on? I can’t think anything.
9. What should you do if you didn’t have enough money to buy something? Get more from the bank.
10. What would you like to save your money up for? A toy backhoe.

My favorite answer is #6. Classic.

Clearly, I need to do a better job of teaching my son about where money comes from, and what he needs to do to earn it. It doesn’t just magically appear from the bank. He understands that I give him an allowance, and he does save up money, but clearly we’re missing a few steps.

Do you know what your kids think about money?

image source: Miranda Marquit