Blog of Roger Hyttinen » Finance

Asking for a Discount

Roger — Wed, 18 Feb 2009 00:49:55 +0000

Photo courtesy of rogerwp

Awhile back, the Life Hacker blog posted an articled entitled Reducing Your Bills by Just Asking. The post stated that:

“Negotiating with companies during an economic downturn can be surprisingly effective.”

I couldn’t agree with this more. Simply just asking for a discount is probably the most overlooked way to save money. As a businessman myself, I very often receive requests from prospective customers asking for a discount. I run a small computer courseware company and often, I will receive a request like, “Will you give a discount for a non-profit organization?” or “Do you offer discounts to government employees?”

My response usually is, “Sure. How does 15% sound?”

I think about it this way: which is preferable, an order for $1,020 or no order at all? I had someone call me one day and ask me: “I am checking out several courseware companies. Will you give us a discount?” Without even thinking, I offered my standard 15% discount. The customer placed the order right then and there. Now, he may have placed the order anyway…or he may not have.

During these economic times, I feel that companies will even be more willing to negotiate. Recently, I was contemplating joining a local health club. I made an e-mail inquiry and was quoted a $195 initiation charge and a $78 monthly membership fee. Just for grins, I e-mailed them back and said, “That’s a bit pricey. Do you offer any discounts?” The next day, I received an e-mail with a new quote: no initiation fee and $68 a month. I’m still thinking about it.

A friend of mine recently called her cable company and asked for a discount. They knocked off $20 off of her monthly bill. So don’t be afraid to ask for discounts from your cable company, health club, credit card company (you can often negotiate lower interest rates), local retailers, etc.

The worst thing they can do is to say is no….but they may say yes.
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Save Money with DVD Swapping Networks

Roger — Thu, 12 Feb 2009 00:23:14 +0000

Photo courtesy of Nickstone333

Awhile back I posted about book trading sites such as Bookmooch and Paperbackswap. A couple of days ago, I read a Lifehacker post talking about DVD Borrowing networks, such as Zunafisih and Lendaround (Paperbackswap also allows you to trade DVD’s). While I am unfamiliar with such networks, Lendaround did look interesting as it is more of a social site and only allows you to share DVDs with friends. Some of these networks also allow you to trade video games, CDs and audiobooks.

I personally do not belong to any DVD borrowing/trading networks as I either get my DVD’s from Netflix or from the library. There are people however, who prefer to own movies rather than rent. In such a case, a DVD exchange program might be a good idea. That is one of the reasons that I belong to Bookmooch and Paperbackswap – while most of the books that I read come from the library, there are a few for which I would like to find a permanent place on my bookshelf. In such a case, I log onto Bookmooch or Paperbackswap, put it on my wishlist and wait until it becomes available.

If you are one who loves to own movies, DVD-trading networks could no doubt save you money, especially considering the $30 or more price tag for a new DVD. It might also be cheaper than paying Netflix $17 or more every month (depending on how many Netflix movies you watch through them).

I’m not sure that I would want to go that route personally though. I am not much of a collector (I habit I’ve gotten rid of over the years) and so far, there has never been a movie I’ve wanted to see that I could not find at either Netflix or the local Library. But if owning is important to you, these networks might be worth checking out.

Some DVD-trading sites that I’m aware of:

Paperbackswap
Lendaround
Zunafish (site is down for upgrade at the moment)
Stuffopolis
Swapadvd
dvdswap

You might also want to check out Meetup.com to see if there are any DVD swapping meetups in your area. Meetups allow you to trade in person and offers the possibility of making new friends as well.

Do any of you belong to DVD trading/swapping sites? If so, has your experience been positive?
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Why I Love Credit Cards

Roger — Tue, 27 Jan 2009 22:25:57 +0000

I have read many books over the years about simplifying your life and the majority of them warn about the evils of Credit Cards. “Chop them up!” they tell you. “Throw them out and never get another one!” they warn you.

I happen to disagree. I personally use credit cards for everything – clothes, utilities, gasoline, repairs – even groceries. The reason: cash-back rewards.

Every couple of months, I receive a check for $50 in my mail box just for using my credit card. I take that check and put it in my “Vacation Fund” so that by the end of the year, I have received a nice chunk of money from my credit card company.

There are some things to keep in mind about credit card rewards however:

Never Carry a Balance
Carrying a balance and paying interest fees defeats the whole purpose of the reward program. It is hardly beneficial to receive $100 worth of reward checks when you are paying $500 a year in interest charges. To get the most out of your credit card’s reward program, pay the balance off monthly.

Pay your credit card bill on time
Again, paying late charges cuts into your reward profits.

Pay your utilities, gasoline, etc. with your credit card
Certain credit cards will give you extra rewards when paying your utilities or buying gasoline with your credit card. Review your reward agreement to see if your card gives extra rewards for such purchases.

Shop around
Look at several different credit cards companies to find the ones that offer the best rewards. Some offer double or triple rewards points for certain purchases.

Make sure your rewards are of value to you
I have seen cards that do not pay cash rewards but instead allow you to receive merchandise, gift certificates or airline flyer miles. I am not much of a shopper (more of a “declutterer” actually) so I have no need for gift certificates for junk I don’t need – personally I prefer the cash. Make sure that your credit card pays you rewards that you find attractive.

Don’t forget to Cash In
Many reward programs will not automatically send you a reward check – or even tell you that you have attained enough points for a reward. Often, it is up to you to keep track of your reward points and take the initiative to cash them in. I usually log into my account every couple of months to take a gander at my points and to see how close I am to my next check.

Read your credit card notices
At times, your credit card company may change the terms of your rewards agreement – perhaps no longer offering cash rewards, only gift certificates. It behooves you to read those “Change in Terms” notices that come with your credit card bill.

Make sure your rewards carry over
Some credit card companies don’t allow you to carry your rewards points indefinitely – they may expire after a certain period of time. If this is the case, may sure that you are able to redeem your points within the specified time period.
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Starting a Freedom Account

Roger — Thu, 15 Jan 2009 21:16:17 +0000

You’re moving along just fine. Your mortgage gets paid, your car payment is sent out on time, you’re slowly getting those credit card bills down and you find that you even have a few extra bucks to spend on yourself at the end of the month. You’re feeling pretty good these days – you believe that you’re finally making some headway. Pat yourself on the back – you deserve it.

Then whamo! The car breaks down and you find yourself facing an $800 repair bill. Oh – and Auto Insurance is due too.

Whoops! Out with the credit card. So much for making headway.

Now imagine that your car breaks down and you are able to simply sit down and write out an $800 check for the repairs – along with another $600 for Automobile Insurance.

“Yeah, right,” you say. “I don’t have that kind of money just lying around. I have enough for my monthly expenses, and that’s it!”

You can just sit down and write out those checks. And believe it or not, it’s not as difficult as you may think. In Mary Hunt’s book, The Cheapskate Monthly Money Makeover and more recently, Debt-Proof Living, she introduces the concept of the Freedom Account, the most indispensable money management tool I have come across. It has made a world of difference in my own personal life.

What the Freedom Account does is gives you control over irregular or unforeseen expenses. You know the auto insurance is due every six months. So do you stick money away for it? Most likely not. It will get paid somehow. How? What about if the car breaks down. After all, do you think it’s going to go on forever without any repairs? And what about vacation? And what about clothes? And what if the washer breaks down? And what about those insurance deductibles? You get the idea.

Hunt points out that the key to financial success is exerting control over your money and one of the ways you can do this is by regularly setting aside money in advance to cover your irregular or unexpected expenses. Now keep in mind that this is not a budget but rather a money management tool.

The author outlines 5 steps in setting up your Freedom Account:

Step 1: Determine your Irregular Expenses
Make a list of all expenses that do not occur on a monthly basis. These would include such things at auto maintenance (yes, you do have to perform maintenance on your vehicle), auto insurance, property taxes, household repairs, clothing, vacation, etc. Then establish a yearly dollar amount for each category and divide by the number of times you get paid during the year.

Let’s say that you get paid monthly. So the yearly dollar amount in each of your Freedom categories would be divided by 12. Here are a couple of examples from my Freedom Account:

Auto Insurance $460 a year/divided by 12 = $38.33 a month

Auto Maintenance $900 a year/divided by 12 – $75 a month

Health Club Membership – $360 a year/divided by 12 = $30 a month

Insurance Deductible – $500 a year/divided by 12 = $41.67 a month

And so on….

Add up the monthly (or weekly/biweekly if that’s how you get paid) total. This amount it the contribution you will make each payday to your Freedom Account.

Don’t worry about the dollar amounts above. Remember – these are sample figures. You will establish your own amounts based upon your personal situation.

Step 2: Open two checking accounts
The author recommends that you open two checking accounts, one for your regular expenses and one for your Freedom Account. This way, you will be depositing enough money each payday into your Freedom Account to cover the expenses that you established above, while the rest of your paycheck goes for your regular monthly expenditures. You will then write checks for your irregular expenses as they come up from your Freedom Account.

As I am a true believer in keeping things simple, I see maintaining two checking accounts as an unnecessary burden. I personally keep all of my Freedom Account funds in one savings account. My credit union provides online access so when a Freedom expense comes up, I transfer the money from my savings account to my checking account and write a check to cover the expense. Plus I earn a little interest on the money – 3% is better than nothing. Rather than a passbook savings account, you may want to consider a Money Market account that allows you to easily transfer money to and from your checking account. Typically, Money Market rates a considerably higher than passbook savings accounts.

Step 3: Request an automatic deposit authorization
If you feel that there’s even a possibility that you won’t be disciplined enough to transfer your payday total of Freedom expenses to your Freedom Account every month, then setting automatic deposit with your bank is a necessity. You can request an “Automatic Transfer Form” from your bank to automatically transfer the funds from your main checking account to your Freedom Account. Just establish the date and the rest is done for you. Many people find this method the easiest way to save – if you don’t see it, you don’t miss it. However, the author recommends that you give yourself a five day cushion. For example, if your payday falls on the 1^st and the 15^th of each month, then you’ll want to set your transfer dates for the 5^th and the 20^th, in case your payday falls on a holiday or weekend.

Step 4: Get a loose-leaf notebook and label it “Freedom Account”
This is the point where you keep track of all your individual Freedom categories. The author recommends that you keep a notebook, designating a page for each Freedom category. Thus, you would have a separate page for Auto Insurance, a separate page for Auto Maintenance, a separate page Vacation, and so on. On the top of each page, you would enter the name of the category and the amount to be deposited each paycheck. Then you would prepare 5 columns: Date, Description, Amount In, Amount Out, and Balance.

I personally track my Freedom data in an Excel spreadsheet. I find that it’s much easier to maintain my balances electronically and the likelihood of making any mathematical errors is greatly reduced. I keep each category in a separate Excel worksheet and maintain a “Freedom Index” sheet which lets me quickly see my category totals. This way, I don’t need to look at every single worksheet to figure out how much money I have in each category. In my next post, I will provide detailed instructions on how to set up a Freedom Account in Excel for those of you who prefer (or would like to learn how) to keep your records electronically.

Step 5: Get in the habit
In order for the Freedom Account to work for you, you must be diligent in your record keeping. So each and every payday, immediately deduct your monthly (or weekly/biweekly) Freedom amount from your regular checking. This is especially true if you are using Automatic Transfer. If you forget, you’ll be in real trouble when your checks start bouncing all over the county. Then, go into your loose-leaf binder or spreadsheet, add the individual deposits into each category and calculate your balance. In my example above, I would enter $30 on my Auto Insurance sheet, $75 on my Auto Maintenance sheet, $13.75 on my Health Club Membership sheet, $41.67 on my Insurance Deductible sheet, and so on.

A few additional points to ponder….
Don’t even think of borrowing from your Freedom account – it is a money management tool not a lending institution. In order for this to work for you, withdrawals must be limited only for what they were intended. I also personally place any unexpected income, such as tax refunds, gifts of money and any writing or consulting income directly into my Freedom Account. Earned overtime income is also a good candidate for your Freedom Account. It’s amazing how fast it adds up that way.

Want to stay out of debt? Then don’t buy anything until you have to cash to pay for it. How do you get the cash? Start a new Freedom category! As I bake and cook in bulk and am somewhat limited in storage space, I decided to purchase a freezer. So I started a “Freezer” category in my Freedom Account and am presently sticking away $30 a month. In another two months, I’ll have enough to make my purchase. In the past, I would have ran out, purchased the freezer and simply put the balance on my credit card. One of the beneficial side effects of setting up Freedom categories for any major purchase (something that you would normally charge) is soon you actually begin to notice your credit card bills declining and before you know it, credit card debt will be a thing of the past. I haven’t had a carryover credit card balance in nearly 2 years, thanks to the Freedom Account.

Last month, I brought in my truck in for repairs – the air conditioning was broken and I needed a new exhaust system. The total came to nearly $1,200 (that’s not too bad considering this is the first time I put any money into it since I bought it 8 years ago). But I didn’t panic. I simply transferred the money from my Freedom Account to my checking account and wrote a check for the entire amount. And this was just after I came back from a week’s vacation – which I also paid for in full from my Freedom Account.

Start small if that’s what it takes – just start! Soon your debt load will be going down and your freedom from worry will be going up. The Freedom Account is truly a life altering tool – I know because it changed mine.

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