Learning how to negotiate is a life skill that gets left out when it comes to wealth-building tools. Kind of curious, since a penny saved is a penny earned, right? And knowing how to negotiate will save you much more than a penny here and there over a lifetime.
That’s why I have listed key insights below on negotiating. I think you’ll be surprised where these insights came from and I’ll share that when we wrap up.
What Types of Things Can You Negotiate to Save Money
There are more ways than you can imagine when it comes to possibilities for money-saving negotiating.
● How to negotiate salary
● Negotiating rent increases
● How to negotiate business deals
● Car price haggling
● Negotiating credit card debt
● House buying (many variables to negotiate besides dollar amounts)
Those are the most common examples of times it is wise to have keen negotiation skills. But remember, knowing how to negotiate is a great life skill in marriage and other relationships as well. As we’ll dig into, it’s not about winning. Not exactly.
Mindset of How to Negotiate
Negotiating takes skill and starts with the right mindset.
● People want to be understood
● Bring empathy to the table
These concepts lay the groundwork for getting what you want. Ironically, by showing the other person that what they want is just as important to you.
Other keys to remember:
● There is no rush (more on this coming up)
● Your tone of voice impacts how your words are received
● Smiling helps (as in most interactions)
Mirroring isn’t just a cheap sales trick you may have seen Michael Scott promote on The Office. It’s a psychological tactic proven to work towards making others feel connected with you.
When haggling over a car price, I’m not saying mimic every move your salesperson makes (i.e. crossing arms or tilting head).
This isn’t a sitcom. But you can feel more like you are working with your salesperson versus against them if you mirror some of their behaviors. It’s a two-way street of bonding that can get you a better deal on a vehicle.
Of course, market conditions play a heavy role even if you know how to negotiate like a pro. Example being low inventory on automobiles and high demand.
Using Deadlines in Negotiations
Remember I stated there is “no rush?”
Not for you. But if you can use deadlines for others, this is to your advantage typically.
People make different (worse) decisions when they are rushed. Who is going to be more logical and disciplined in the following example?
You tell a home seller your new job starts in seven days so you need an answer by tomorrow.
Since you have set the deadline, the seller is more likely to feel rushed as long as this was your plan of action. Now, they may not be able to sell for the price and stipulations you asked for, but you have shifted odds in your favor.
Again, the market is part of the equation here. If demand is high and home inventory low, they can just wait on the next buyer - probably looking over your shoulder! But if demand is low and inventory high, you have the upper hand, and setting a deadline increases this advantage.
Quick Note on Investments of All Kinds
Knowing how to negotiate will help when you see home-buying as an investment. Many home buyers only think about rising property values and the equity that typically comes with owning a home.
Yet, when you buy at a lower price, every thousand dollars you save through haggling is money in your pocket when you sell. This may seem obvious, but I can’t stress enough that you make money when you buy… not when you sell.
This is the mindset I heard from a car dealer a while ago and it has stuck with me ever since. Stick around for another fun story from this guy on pricing.
How to Negotiate (Anchor Price)
Ever wondered why people set a price they know they won’t get for a house or used car? Because it apparently works well.
Some refer to it as anchoring the price. Example: your initial price is 35% more than you’re truly willing to accept. This can give the buyer a feeling of being in control as they ‘get’ to bring the price down from the point you first anchored in their mind.
I knew of a gentleman who used to buy and sell homes and would toss out a low offer on homes up for sale. Offers he knew may be insulting, so he’d alert them to that fact from the start. However, many sellers would come back to him weeks later and accept the offer because they were in a hurry to move (job change and other life events).
His initial lowball offer likely had a little flexibility. And if the seller got more than his initial offer, they could at least feel a little better about the deal.
It’s Not About the Money
When someone says “It’s not about the money,” be sure, it’s about the money!
Seriously though, knowing how to negotiate parts of deals unrelated to money can help your cause.
This could be the case in unfortunate events such as divorce. Keeping goodwill between you and your former spouse is extremely important in most cases. And you can often make non-monetary concessions that don’t mean much to you but would mean more to your partner.
Same goes for hiring employees or taking a new job. Think outside the cash box to stimulate ideas that help you in various negotiations.
Two more related tips:
● Leave emotion out of deals
● The listener has the advantage in conversations
Signs to Beware in Negotiations
Don’t fall prey to dishonest people when hammering out deals.
Spotting lies and liars is vital to learning how to negotiate. And this is solid information because this article was inspired by an interview I saw with a man who worked for the FBI as a hostage negotiator. His book is here.
How to spot dishonesty:
● Liars tend to talk too much
● Listen for sentences that are intentionally complex
● Notice use of words other than “I”, this distances the person from a lie (example: “My manager: won’t budge on price / doesn’t give refunds / says the warranty isn’t applicable.”)
How to Negotiate Summary
Now you have a few more tools in your life skills toolbelt that will save you money over the years. Remember, saving money is as good as earning it, like we discussed at the start.
Negotiation comes down to human psychology.
Not a simple concept since we are complicated beings. But you have the basics of a good negotiation mindset and little hacks that will help you get what you want by truly understanding what the other party wants (🔑even if you don’t agree with their point of view at all).
Be sure to invest all the money you save with your new negotiation skills, which you can improve even more with the book from former FBI negotiator Chris Voss.
*As I promised… the other story from my car dealer acquaintance says a lot about human psychology. He wanted to get rid of some old tires. So he set them in front of his car lot with a for sale sign of $40. Overnight, someone ‘stole’ the worthless tires because of the perceived value he set in their mind with a for sale sign.
Investment advice offered through Private Advisor Group, LLC, a registered investment advisor.