The past few weeks have been a pretty interesting and exciting time in my life. I resigned from my teaching job to start a financial education company and grow Millennialmoneyman.com, and much more importantly got married this past weekend! Because of those two life changing events I have had several large purchases come up that I normally don't have to deal with, which I realized I could turn into a teaching moment for other young people like me.
When you get married, you have to buy a bunch of stuff. Really…when you get into your mid-20's you have to buy a bunch of stuff, and it wouldn't hurt to be good at it. People my age don't realize that you can get better prices on big ticket items, and it is hurting their pocketbooks in a HUGE way.
Haggling is a skill that all Millennials need to master.
Before I tell you the essential steps of haggling below, please understand this: You can't just roll up into the grocery store and try to get a better price on a bag of chips. It only works on certain things. (However, if you try it at the grocery store and it works please let me know…supposedly you can haggle the price of meat, bread and lobster. Who knew?)
Millennials are pretty good at buying junk from online retailers that are totally free from human interaction. The only thing you need to waste a bunch of money in this day and age is an internet connection and a credit card! My professional guess is that we suck at negotiating in real life, because most of us have the real world people skills of a beta fish.
Learning how to get a better price on items is a bit of a lost art for Millennials, and can feel pretty embarrassing if you aren't comfortable with what you are doing. Feeling uncomfortable in a purchasing situation leads to getting a horrible deal for you, and a freaking awesome deal for the salesperson. Fortunately, haggling is easy and you can apply your hustled savings towards your student loans, credit card debt, or investment capital to begin building wealth!
You just have to know a few simple tricks.
One of the things that my wife and I had to purchase recently was my wedding band. I originally wanted a tungsten carbide ring (which is honestly pretty cheap compared to other metals), but she wanted me to get something a bit nicer since it would be on my finger for the next 50 plus years.
“Happy wife, happy life” is a real and serious thing people…so I immediately went with white gold instead to keep the peace. I wasn't comfortable trying to buy something as important as my wedding band online, so we went to the mall – which I hate. Malls are awkward social hangouts for teenagers disguised as a marketplace. Regardless, I knew that I would have to deal with a salesperson for this purchase.
I used to be intimidated by salespeople until I started learning how to haggle. Now it feels like a fun mind-battle with the person on the other side of the counter. 🙂
Below is my quick how-to guide for haggling. I used it to get almost 40% off of the sticker price for my wedding band in about 10-15 minutes of negotiation. You can use this guide in a ton of situations where you want to save some cash that you can use to pay down debt or build up wealth. Even though I was buying jewelry, you can apply the following haggle steps to negotiate anything from car tires (which I did recently as well) to appliances or even rent:
1) Realize the main goal – cut into their markup.
No matter what the item is that you want to purchase for a lower price, you need to get a feel for how much of a markup that there is on the item. That is how retail companies make money. They buy goods at a low price, and sell at a (usually) much higher price. Your ultimate goal is to see how much they are willing to dip into the margin to make a sale.
Before you get started you need to understand that there IS a limit to how low you can get the salesperson to drop the price on whatever you are buying – and they will stop negotiating with you once you hit the target price. Your goal is to get as close to that as you can.
2) Embrace the feeling of being a cheap person.
This one is tough because you will feel like a complete cheapskate when you are trying to get the salesperson to give you a lower price. In this country we get a sense of pride from being able to “afford” something and pay well for it. In reality, most of us are just trying to pretend that we aren't as poor as we really are by showing that we are willing to pay high prices. Forget about all of that nonsense. Rich people are rich because they don't spend all of their money. Period.
When it comes to the successful haggle, you should be as cheap as humanly possible. The salesperson or the people within ears reach can judge all they want, but they don't have to pay your bills when you leave the store.
3) Keep it simple at first. Start by asking for a better price.
The haggling process can start out unbelievably easy. Ask for a better price, nothing fancy. If the salesperson bites, then it's game on. This means that they have a decent markup, and they just tipped their hand that the price can be negotiated.
At the big box jewelry store I was shopping in, they cut $150 off of the price tag just because I asked them to. The scary part is that many people pay the first price without even asking! There are several ways to achieve this step, but I usually go with “What's the best price you can give me for this?”. They will probably give you a lower quote, but the game isn't done there. Their “best” price is usually pretty far off from YOUR “best” price. Just trust me and keep reading for my secret haggle weapon…
4) Tell them that you like what they are selling.
Haggling is a game of psychology. If you mention a few times throughout the conversation that you really like whatever it is that you are looking to purchase, you'll see something pretty interesting: The salesperson will get noticeably excited and their body language will change a lot (more smiles, a little more animated, etc.)
When a salesperson smells blood in the water, they will try a little harder to make a deal. They are hard wired that way…they want the commission and think that they may have you hooked. You WANT your salesperson to feel that way, because they may dip lower into the markup to make the deal with you.
5) Mention their competitors and walk away.
Sales people want your business, but they REALLY don't want their competitors to have your business. After I was quoted a lower price by the salesperson for my ring, I told them I was going to go check out some other jewelry stores and look for a better price for a similar item. The salesperson will either say something like “Oh you'll be back”, or drop the price down a little bit more. Keep their new number in the back of your mind but don't take the deal…you aren't done yet.
Walk away and go check out the competition. If there isn't really a competitor nearby, go somewhere and hide out for about 5 minutes. You don't want to take too long though – they need to remember who you are when you come back.
6) Hit them with my secret weapon – Awkward Silence.
People that work in sales are humans too, but it's really easy to forget that when you are in a high-pressure sales situation. They generally hold all the cards and have the advantage over you (the buyer) when you are in their store. They know the markup, have sales training, and know lots of little tricks to get you to cave at a higher price than you want (i.e. bringing another salesperson over so they can double-team you and pressure you into a decision).
Luckily for you I've found something that neutralizes most of their advantages. If you have already completed steps 1-5 and come back in to the store for the final round, do this:
Be really quiet and make it weird.
Yep. Have you ever been in a conversation that turns into awkward silence, and wanted so badly for someone to end it and say something? It works the same way in haggle land, but the salesperson will end it with dollar signs. Here is how I do it:
1) Tell the salesperson you really want the item, but you just don't think it's at the price you can afford. (They will try to hold their ground because they think they have you right where they want you).
2) Stare at the item, and literally don't say anything for about 2-3 minutes. Make it as uncomfortable as possible, and DO NOT BREAK THE SILENCE FIRST. If they try to talk or ask a question, ignore them and stay quiet.
3) Sigh a few times and look sad. Seriously.
4) They will crack and make their last offer in an attempt to end the horrific silence. $$$$$$
5) Celebrate (internally).
If you are wondering what that looks like in real life – two completely different jewelry stores magically found a $100 off coupon in the back of the store after I hit them with the awkward silence trick. It was pretty hilarious really – my wife couldn't believe that both stores did the exact same thing. After that, I chose the ring that I wanted at the new haggled price, and we left. They got a commission, I got a ring and supported capitalism. Win-Win.
P.S. – A lot of places will try to push their special credit card on you in an attempt to “help” you purchase the item that you want for low monthly payments. They tried it on me at one jewelry store, and it was hard for me to not laugh at them. For the love of everything good in this world – don't do it.