How Do You Guys Do It? Part II

January 25, 2013

 

All the money she's saving on cream cheese, she's blowing on haircuts.

All the money she’s saving on cream cheese, she’s blowing on haircuts.

Welcome to the latest installment in our series on how to avoid being poor – by adopting some of the easy and painless techniques we already did. Last time, we wrote about costs that provide negligible benefits, stuff like smoking and drinking. If you missed it, we said it’s dumb to ingest things that cost you money and compromise your health. Which either makes us sanctimonious, or richer than the people who think we’re sanctimonious. One, the other or both. We’re not sure, we can’t hear you over the endless cascade of silver dollars collecting on our kitchen floor (tiled with that $11-a-square-foot brown travertine medallion mosaic stuff, which can get really loud.)

Today, something additive instead of subtractive. It’s easy to tell you what not to do.

Leverage your time. If you’re going to be fanatical about anything in your financial life, let it be this.

We make fun of him weekly in this space, but that contradictory fat man Trent Hamm at The Simple Dollar deserves every last brickbat we throw his way. But he’s not the only one guilty of the practice of encouraging people to waste their precious time calculating returns that end up saving you far less than minimum wage. After hundreds of thousands of years of evolution, humans still don’t have an instinctive grasp on the idea of raw numbers being less important than those same numbers modified with respect to time.

What we mean is this: Would you like $100,000?

You’re going to answer yes, if you’re operating under the implicit assumption that we’re going to immediately hand you $100,000 in some negotiable instruments. Cash, a giant novelty check, whatever.

Okay, would you like $100,000 if you had to work for it for a year? The job is nothing awful. You’re not going to have to give foot massages to that fat actress on that TV show, or anything like that. Air-conditioned office, 9-to-5 workday, 2 weeks’ vacation, bagels in the break room every Monday, no ugly surprises.

Most of you presumably said yes, but a significant handful said no, why would I take a pay cut just to comply with the terms of Control Your Cash’s dopey hypothetical exercise?

How about $100,000 for 20 years of volunteering at a soup kitch—alright, you see where we’re going with this. Any commodity vital to existence that you take in (and in the case of money, give out) – food, water, whatever – has to be expressed in terms of time for it to have any meaning. Why? Because we’re mortal. The clock is always ticking. If you made it this far into the post you’re already that many minutes closer to death, and for what? We don’t want to waste your time, so let’s expand a little more on the importance of looking at dollars netted versus time expended.

An hour spent clipping coupons is a feel-good exercise, not a serious attempt to increase your wealth. Divide the penultimate line on your grocery bill (“You saved “$4.33 today, Smart Shopper”) by the time you spent going over your mailbox flyer with a jeweler’s loupe and an X-Acto knife, and it can be depressing. Don’t even get us started on the wisdom of receiving alerts from Gas Buddy. The reward is only worth the effort rendered if you think your time means nothing. It doesn’t. Rich people value their time. If that manifests itself as impatience on occasion, have sympathy. Those rich people have more important things to do. Warren Buffett may live in an old and modest house, but you can bet he takes a private jet everywhere. Does he do it because he wants to flaunt his wealth? Of course not. Hardly anyone can see him, and private jets don’t attract a lot of attention anyway, unless you happen to be hanging out at executive airports and general aviation facilities. Buffett flies a private jet because he doesn’t want to waste his time getting to the airport 2 hours early, taking his laptop out of its bag, or ensuring that his leave-in conditioner is in an approved bottle of less than 3 ounces.

When we say to be aware of what you’re spending your time on in lieu of spending your money, don’t go overboard. It doesn’t mean that every activity in your day has to have some economic justification. Watching TV is what you do after you’ve had a long day and just need to crash on the couch for a while. It earns you $0/hour, and that’s fine. Same goes for learning guitar, if that’s your thing, or trying to fix a leaky toilet. It’s when you’re doing a financially specious activity that you should step back and ask what it’s really costing you. For instance, cataloguing your 1000 used DVDs. Writing descriptions and taking photos of every single one so you can sell them on eBay. That’s an intensive project with miniscule rewards. Just spend 3 minutes putting them in a box, then drive them to your local library. And enjoy the time you saved.

Next up: Putting that time to worthwhile use.

Filed Under: Capitalism, Economics, Finance Tagged With: , ,

We’ll Give You $5 To Reject The First Offer

December 28, 2012

You’ve probably heard the expression, “You don’t get what you deserve. You get what you negotiate.” Okay, who coined it?

  1. Zig Ziglar
  2. Og Mandino
  3. Yag Oliveri
  4. Tom Peters
  5. Chester L. Karrass

1, 2 and 4 are/were self-help authors and motivational speakers. 3 is a name we made up.

5 is the right answer. You might remember him from such SkyMall ads as The Karrass Effective Negotiating Seminar. He’s this dour yet confident man:

C-dog

 

He might not even exist. Biographical information on Mr. Karrass is sketchy, but if he’s alive it seems he’s 89. That seems to be the most recent picture of him, and it looks to be at least 30 years old. Anyhow, Chet fancies himself as the authority on negotiating. Sit through one of his seminars and you’ll learn how not to leave money on the table, and how to make your adversary weep and gnash his teeth while you bleed him dry and leave a desiccated carcass where a would-be negotiator used to be.

The first rule of negotiation, as we all know? Get a number out of the other person first. Oh, you want my car? How badly? (Or conversely, You want to sell me your car? How badly?) It doesn’t matter how long the standoff (or standstill. Standoff? Standstill) lasts. Wait, wait, wait until the other party mentions a number, out of sheer boredom if nothing else. At that point, he’s already ceded tremendous ground.

What if you’ve both heard this rule and taken it to heart? Then stand there staring at each other until the 7th Seal is broken, whatever. This can’t happen in real life, only in theory, because at one point one party will say “This stalemate is eating up so much of my time that I need to be compensated for it. I quit. Either that or I’m internally recalibrating the scale and raising/lowering my price.”

Exchanging a car is the classic example, because it seems everyone does it sooner or later and the market itself is relatively unencumbered by regulation. And it usually involves head-to-head confrontation between the parties. But regardless of what good or service you’re exchanging, the rule applies. Get a number before you give one.

Here’s the funny part.

Q: How much does it cost to sit through a Karrass seminar?

 

Karrass

 

A: Exactly what they tell you it’s going to cost, Ace. Take it or leave it.

Now if you spend $1000 (excuse us, a much more reasonable $998) on a seminar, are you getting the best possible deal? Or are you on the receiving end of something one-sided?

You’re not negotiating, at any rate. Furthermore, the folks at Karrass seem to be violating the first rule of negotiating themselves. So what gives? Is everything we think we know a lie?

The Karrass people would argue that you have to be practical, it would grind their business to a halt if they had to haggle over every single transaction. The Control Your Cash people would argue that if you take the other party’s first offer, you’re paying too much.

You don’t need to drop a grand (or $900, if you can find 4 friends with too much money) to learn how to negotiate. You just need to develop a backbone. Learn to walk away. It’s this compulsion to make a deal, any deal, that leads to awful decisions. Even in the non-economic realm. Just ask the lonely guy who does everything but get down on his knees and beg a woman to go out with him because darn it, we were meant to be together. (Or less commonly, the girl who wants the abusive but occasionally charming guy to take her back.)

After you’ve bought several hundred copies of The Greatest Personal Finance Book Ever Written (complete with details on how to negotiate!) check out this 1997 release by sports agent Mark Shapiro, The Power of Nice. Don’t be fooled by the title, he’s still an attorney and thus probably an awful human being, but the book does contain one exercise that perfectly illustrates what we’re talking about.

Reciting the exercise from memory, you’re supposed to find a partner and each read one side of a page that describes financial details of a potential real estate deal, then negotiate said deal. One person, the seller, reads that he should sell the property in question for somewhere around $2 million, with a little wiggle room. Meanwhile, the buyer reads that he shouldn’t offer much more than $300,000 if he can help it.

The interesting thing is that the negotiated price is almost never around $1,150,000. Inevitably, it’s either close to $400,000, or close to $2,900,000. One party does almost all the conceding.

So don’t be that person. Easy, isn’t it? Lowball profusely if you’re the buyer, ask for something on the verge of absurdity if you’re the seller. Whether it’s a salary, a physical good, whatever. There’s an inherent reluctance to do this, for fear of insulting the other party or not having him take you seriously. Get over this. There are an infinite number of deals to be made, and only a small thinker thinks “I have to make this deal, no matter what.” Being dictated to is no way to build wealth.

Filed Under: Capitalism, Education, Making Smart Choices Tagged With: , ,

Our $616 Windfall Could Be Yours

December 7, 2012

 

It’s 2012. Why are we still getting mail?

This summer we wrote about the inefficiency of the live event ticket market. The primary sellers – TicketMaster and their ilk – have attempted to maximize profits by not only tacking on dubious charges and fees, but selling tickets as much as 10 months in advance of the show date. That gives said ticket distributors a chance to enjoy your money even earlier. A bird in the hand, etc.

We can’t emphasize this enough, which is why it warrants a 2nd post – buy your tickets as late as possible. (See? We can be repetitive, too! All the greats do it.) You people who claim “I like to collect experiences, not things”, whatever that means, especially should take heed here.

Like that of a lot of goods in the last decade, the market for tickets has changed drastically. The original problem was that it was a pure monopoly, or at least had most of the characteristics of one. You bought your tickets from TicketMaster, or whomever, or you missed out and panicked on the day of the event, which involved going to a scalper at the venue. And for anyone who’s ever done it, buying from a scalper feels slightly less seedy than patronizing a pot dealer or a veiny prostitute.

You don’t have to do this anymore. There’s a better way. As business author and envelope maven Harvey Mackay puts it, “There’s no such thing as a sold-out house.” Here’s how you get tickets for that basketball game/Lady Gaga concert/flea circus without tying up your money unnecessarily.

Wait until the last minute. Not literally the last minute, but close enough. Tickets go on sale this week for a concert that doesn’t take place until April? Major League Baseball released its schedule and you plan to see the Diamondbacks play the Dodgers in the final homestand of the season? Relax. Have a soda. Go for a walk. Fly to Argentina, marvel at the Andes for a few weeks.

Then, 3 (or better yet 2, but it’s hard to get there without practice) days out, hit

  • StubHub
  • eBay
  • The underrated superstar here, Craigslist.

You know how you can lose all sense of discretion when you’re enthralled by a live event, playing air drums along with Neil Peart or cheering a football team onto victory against a division rival? There it is again, that cursed right brain getting in the way and ruining our lunch. Cutting loose during an event is fine, even encouraged, but you still have to be icy and logical during the process of buying your ticket. OMG RAVENS-STEELERS GOTTA BE ON THE 50-YARD LINE NO MATTER WHAT NO MATTER WHAT I SAY is no way to commit what could be a few hundred dollars to what’s only going to last 3 hours or so, tailgating excluded.

Slow down and remember – you’re buying something extremely perishable. Getting excited about buying a car, and risking overpayment because you’re afraid it’ll be gone tomorrow, is dumb. But behaving the same way regarding an event is even stupider because…

On balance, it’s almost always a buyer’s market. Unlike the tickets in the seller’s possession, the cash in your pocket will still be worth something tomorrow. Use that leverage.

But I have to see Chris Brown! It’s the last show of the tour, and he might be in prison a year from now.

Again, slow down. You don’t “have” to see anything. And they’ll play the Super Bowl next year, too. They always do. It’s fun to think that your life becomes more meaningful if you inconvenience yourself to see a concert or a game that you think holds special meaning. Maybe it even does. But if it does, that doesn’t mean you should overpay for the privilege.

If you’ve never used StubHub, it’s straightforward. And credible, after eBay bought it and made it a wholly owned subsidiary. eBay still maintains its own ticket marketplace for some reason, and lets you see availability and prices on both sites side-by-side:

 

 

So that gives you a starting point. Another thing to remember, and this is critical:

Asking prices mean nothing.

This is a corollary to it being a buyer’s market. A seller wants $900 for a pair of tickets with an official price of $100? Good for her. She can offer them at $30,000 if she wants, it doesn’t matter. Maybe some sellers do this in the hopes that some maldextrous buyer will accidentally press the “Buy” button and create the easiest windfall ever.

(Side note: The media attention surrounding the recent “hyperinflated” prices for Twinkies on eBay. A local newspaper reporter in CYC’s hometown claimed that Twinkies were selling for $250 apiece. They weren’t being sold at that price, they were being offered at that price. You need to look at the actual auction closing prices, which were more in the neighborhood of $2.50 per, to gain any useful information here. The exaggeration was 100-fold, but isn’t that what journalism is largely about?)

Watch one eBay ticket auction, participate if you must. Once it closes, you have the knowledge that turns the buyer’s advantage into an overwhelming one. You’ll know the crucial second half of the equation, and thus where supply and demand intersect. This places the sellers at an even bigger disadvantage.

Here’s a real-life example. We wanted to see Rush play our hometown a few weeks back. And if we were going to go, we wanted to be on the floor. The sticker price for floor seats? $154 each.

By the way, we didn’t get financially independent by making it a habit of dropping $308 for a few hours’ entertainment. Instead we hit a couple of eBay auctions, 2 and 1 nights before the show. Each time we were outbid in the final seconds, which told us a couple of things:

  • There’s some sort of demand for tickets. It’s not as if we could just swoop in and lowball on an item that no one else wanted.
  • Floor tickets were selling for about 10% below cost. Which meant they’d be getting cheaper, not more expensive, as showtime approached.

We were legitimately hoping to win the 2nd auction, but that’s the point. Don’t overpay, which means don’t overbid. We set a maximum bid before we started, and didn’t raise it, no matter how tempting doing so sounded as the clock ticked down to 0.

Then we headed to Craigslist, where buyers aren’t protected as well as eBay buyers are. You might get scammed on Craigslist, but most of the people who do are idiots and are practically pleading to be taken advantage of.

Go to NameOfYourCity.craigslist.org/tix. You can select tickets sold by owners, sold by brokers, or both.

You want tickets sold by owners. It that isn’t obvious, there are several reasons:

  • An individual owner has more incentive to sell his tickets than a broker’s employee does.
  • The former is easier to negotiate with, and probably easier to research (again, covering yourself when dealing with unknown players is critical.)

There were maybe 25 sellers hawking tickets on Craigslist. We eliminated anyone who didn’t advertise what section their tickets were in. (Why are they wasting our time, and why would they waste theirs?)

That left maybe 12, all of whom we sent the same email to. “Will you sell them for (10% below cost)?” (Unless some of the sellers had been already offering them for even less, in which case we’d offer something still less than that. But no one was offering them for so little.)

A few didn’t respond, a few said their tickets were already gone, and one liar claimed that if he didn’t get his asking price, he’d just eat the tickets. That left one guy, who said that we could name our price. Why? Because he was thousands of miles away, and had physical tickets in hand.

We improvised. We suggested he call the venue’s ticket office, explain that he couldn’t go to the show and wanted to transfer ownership to someone local, and plead his case.

And damned if the venue didn’t say yes. Even better, the poor guy had bought 4 tickets – twice as many as we needed. They emailed him a PDF of all 4, he forwarded it to us, and said “enjoy the show”. Your mileage may vary – of course, you can’t assume that you’ll find that one person in a thousand who’s willing to give away $616 worth of tickets that he’d already written off.

Did we sell the remaining pair (for something around 10% below cost) and pocket it, essentially getting paid $277 to go to a concert?

Did we sell the remaining pair and give the proceeds to the original owner?

Yes, maybe, no, that’s not the point. The point is that we never would have been in such a position had we repeatedly hit “Refresh” on TicketMaster.com on the day sales opened, until we could finally purchase a pair. Again, let other people be the profit centers – not you.

Filed Under: Capitalism, Making Smart Choices Tagged With: , , ,
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