Ever wish you could pay less for a car or a couch? Make more money? Negotiation skills can help.
The ability to negotiate is a powerful personal finance tool. We talked to experts to learn the basic skills that can help your budget.
1. Ask questions
“Information in a negotiation is power,” said George Siedel, professor of business administration at the University of Michigan.
You can negotiate better when you know what the other side wants. If you can learn the interests of the person on the other side and match them with your own, you can get to a deal that benefits both sides, Siedel said.
2. Have alternatives
“If you have good alternatives you are in a much more powerful position in a negotiation,” Siedel said.
If you’re negotiating for a raise and another company has offered you a job at a higher salary, you can push harder because you have a good alternative if the negotiation fails, Siedel said. Or if you’re buying or selling a car, having options gives you more power to walk away from any single negotiation. Even if you’re set on a particular car, having an alternative can help get you a better price on your first option.
3. Make an offer
You may have an ideal price in mind when you’re buying a car. But don’t start there when negotiating, Siedel said. If you want the car for $10,000, say you’d like to buy it for $7,000 and see where the negotiation takes you. You may end up paying less than you expect.
Deals tend to be anchored around the opening offer, said John Lowry, president of the Lowry Group, a negotiation training firm. In a situation where there isn’t a set price, like work on your home or car purchase, it can be a good idea to throw out a price to see if someone will accept it.
When would you use these skills?
Negotiation and haggling aren’t huge part of our culture, Lowry said. But it never hurts for consumers to ask if they can get something for less.
“The question is not ‘Where can you use negotiation,’ the better question is, if you’re not negotiating, then why aren’t you in all aspects of your life?” Lowry said.
For example, Lowry teaches negotiation at the Pepperdine University School of Law. Many parents and students call the school and haggle over how much scholarship money they receive or how much tuition the school charges. Any in-home services like contractors, repairmen or cleaners are also subject to negotiation.
Negotiating may be harder in a retail environment, Lowry said. The person checking you out at Target probably lacks the authority to lower prices for you. But if you’re spending $10,000 at a furniture store, you can push the sales staff on prices.
Siedel teaches negotiation both at the University of Michigan and through an online Coursera course. Many students tell him they have found success renegotiating their cable bills by getting alternative prices from other cable providers. (The same strategy is particularly effective when you’re trying to get a better deal on car insurance.)
He also asks students to try to negotiate a discount at a restaurant as part of his course. The majority are successful.
“With about 40 students in the class, they usually save a couple thousand dollars in total,” Siedel said.
Success can depend on how comfortable people are with negotiating. While many students get a discount, half of them find the experience terrifying, Siedel said. Siedel will often negotiate for a discount when staying at a hotel, but his wife refuses to accompany him to the front desk.
What should you avoid when negotiating?
Don’t do all the talking. You can’t argue your way into a good deal. You have to find out what the other side wants and reach a compromise.
Don’t go into a negotiation unprepared. Without good alternatives and an idea of your goal, your negotiation is less likely to be successful, Siedel said.
Don’t waste your time. A discount is great, but if it’s going to take forever to get to a deal, it may not be worth it.
“If you’re having fun with it, there’s nothing wrong with that, but if there are other things you’d rather be doing, don’t become obsessed with saving a few dollars,” Siedel said.
Don’t lie. Exaggerating is one thing, but it can be dangerous to slip into committing fraud, Lowry said. Not only could you face legal ramifications, but misleading people is simply unethical.
How do you get better at negotiating?
The best way to improve is by doing it, even if you fail, Lowry said. Failure might be lead to some temporary embarrassment, but success can have a big impact on your budget. Plus, you may get more enjoyment around everyday transactions.
“If people do it, what they will find is that if they intellectually engage in the process, they’ll find what is typically mundane becomes kind of fun,” Lowry said.
Are you one of those people who hates haggling? You can outsource negotiating your bills to one of these four apps instead.
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.