The Personal Finance Podcast - How to Negotiate Your Bills (and Save over Six-Figures!)

Episode Date: October 21, 2020

Episode 24: How to Negotiate Your Bills (and Save over Six-Figures!) In this episode we cover:  How to Negotiate Your Bills  Why negotiating your bills will save you 6 figures  What bills are the best to negotiate  What to say when negotiating  RESOURCES: M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be an affiliate link and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Learn more about your ad choices. Visit megaphone.fm/adchoices

On this episode of the Personal Finance Podcast, we're going to talk about how you can negotiate your bills and save yourself an additional six figures in retirement. What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today on the podcast, we're going to be talking about how you can negotiate your bills and save yourself an additional six figures. And negotiating your bills is something you have to understand takes a little bit of practice. And it takes a little bit of research beforehand to be able to do this. But there's a bunch of great benefits to negotiating your bills. And there's a bunch of reasons why you would want to actually take the time to do this. The first of which is, let's say you negotiate down a few bills. And we'll talk about some of the bills that you can negotiate down here shortly.

But let's say you negotiate down a few bills. And you save an additional $100 a month collectively between all those negotiations. Now, I think you can save a lot more by negotiating your bills. but let's just say that you save an extra hundred bucks. Well, that's $1,200 a year. And if that took you one hour, you just made $1,200 in one hour. But here's the bigger picture with the same action items here. If you invest $1,200 a year with an 8% rate of return, which is the average for an index fund,

over the course of 30 years, you're going to have $135,000 just by negotiating down your bills and taking a little bit of time every single year to make sure your bills are on track and at the right pace that you want them to be at. And here's the crazy part. Over the course of 40 years, if you save an additional $100 a month at an 8% rate of return, that would accumulate to $310,000. So I don't know about you, but taking an additional hour twice a year to look at your bills and make sure they're at the right pace so that you can have an additional $310,000 in retirement is a massive benefit for you.

This is a massive, massive action item to take. And that's just with a small amount of savings. Imagine if you can save more money. And if you save bigger amounts of money, you're going to be saving even more money over the course of time. Let's just say, for example, that you saved $2,400 additional a year. Calculating that same number over the course of 40 years

is $621,000. So if you save an additional $200 a month by doing this exercise once a year, you're going to save yourself an additional $621,000 in retirement. That's over half a million dollars. You're approaching a million dollars with that action item. And that's why this is so important to do and so important to keep on top of because it's going to allow you a much bigger retirement and a much bigger nest egg over the course of time.

When should you do this? First off, if you haven't looked at your big three expense items yet, and if you didn't hear the episode where we talked about the big three expense items that you need to slash so you can spend lavishly on everything else, Those are transportation, housing, and food. So the first thing you need to do, before you negotiate any bills at all, is look at those three action items and see if you can cut back. Now, doing this is only if you're not hitting your savings goals.

If you're not hitting your savings goals and you have a plan in place and you want to save a certain amount of money, then these are the action items you need to take. The first thing you need to do is look at the big three. And then secondly, you need to start negotiating your bills down. Those are the first two action items, because those are the first things you can initially control. And then what you really want to do over time, and the big thing is, is not cutting back your expenses.

The big thing is actually increasing your income. And we talk about this all the time because that's we're going to make massive steps as well. So between doing both of these things, controlling those expenses and increasing your income, that's how you build massive wealth. That's how you get massive wealth. And you can retire early and spend more time with your kids and do exactly what you want to do. So we're going to talk about today how you can negotiate down your bills. So if you've already looked at your big three expenses, you slashed where you can on those big three expenses, then it's time to look at your bills and start negotiating with some folks out there. So let's get into how to negotiate your bills.

So the first thing you may be asking yourself is what the heck is the time commitment to negotiate your bills? I don't want to spend my Saturday trying to negotiate down bills all day long. And what I found over time is I do this once or twice a year. But it takes about 30 minutes to an hour to research all your bills and just look at it. at them and see what kinds of extra fees are on your bills or things like that that shouldn't be on there. And negotiation takes about 30 minutes to a couple of hours depending on your wait times. Now, if you call it the right times, you can find peak times to call where nobody's calling, and it's usually right when they open early in the morning.

Then you have a better opportunity to be able to get through and reduce the amount of time this takes. But just keep that in mind because it does take a little bit of time every year, but it's worth it for those massive numbers. You're going to save over six figures over the course of your lifetime just by doing this exercise. So it's absolutely worth every single hour that you spend. And it's going to be probably the highest dollar amounts you make every single year. Let's say it takes you two hours to negotiate $1,200 a year. You're making $600 an hour.

This is a very high money-making activity. So there's a number of bills that I want you guys to look at. And these are the types of bills that I like to look at to negotiate. One is your cable. Cable is number one. Now, in a future episode, we're going to talk about how you can cut your cable. I've cut my cable and I've had no cable for about seven. years because I was tired of my cable bill being above $140, $150. So I cut the cord and I get all the

cable channels just in a different way. And we're going to talk about how you can do that. But cable is one to look at it. If your cable bill is massive, then look into potentially either cutting the cord or negotiating with them or switching carriers to get a better deal because cable is a massive one. You could save 30, 40, 50, 60 bucks a month just by looking at your cable bill. And if you cut the cord, you can spend half the amount you're paying right now to be able to do something with your cable bill. And then the next one is your cell phone bill. So looking at your cell phone bill is a massive, massive thing that you have to do. Because a lot of times cell phone bills will add extra fees on there or add extra costs that you are not even using.

So for example, I had a friend who went and got a new iPhone. And what they did was they did the rent until you can buy plan. So they're spending $25 a month renting the iPhone. And then at the end of two years, they can go ahead and outright buy their iPhone for $200 or whatever it is. Well, they just kept the same phone. And for four years, they were spending $25 a month. And so what happened here was they doubled the price of the iPhone over the course of those

four years instead of just stopping the $25 a month and paying $200 at the end when the contract ran its course to be able to just to buy the iPhone back. So they spent almost additional $1,000 on an iPhone just because they didn't check their bill and look and see if they can negotiate that back down or just be able to catch that so they can purchase the phone outright. And a lot of cell phone companies will add on fees and things that you can negotiate off and you just have to discuss it with them. Maybe they give you additional tethering or data that you're not using. So there's all kinds of things that you can look at for yourself, for your personal needs to be able to negotiate down. The third one is credit card interest.

So if you're in debt and you're paying credit card interest, you can go ahead and try to negotiate down your credit card interest. Or look at your credit card interest, and this is a high, high value activity and maybe transfer it over to a zero balance credit card. And it really goes for any debt. Think about your student loan interest rate or any of those. If you refinanced to your student loan interest rate,

you're saving thousands and thousands of dollars over the course of that student loan. So that's something you definitely want to look at. The next one is car insurance. Sometimes you have more coverage than you need. So if you look at your car insurance bill, talk to your agent and just talk through, hey, what do these numbers mean? What am I actually getting out of this? And if it seems too high to you, you can reduce your car insurance bill significantly just by having this conversation. Maybe you're driving a hoopty, but you're covered for a million dollar accident.

Well, you don't need a million dollar coverage if your coverage is 20 times the amount of your actual car value. So that's something else to just look at. Look at your car insurance. Home security. If you have a home security system, look at that. subscriptions to magazines, newspapers, anything like that. Either if you don't use them, cut them out. If they don't bring you value, cut them out. Or if you use them, then negotiate the pricing. Gym memberships. I negotiated my gym membership down where everyone I know was paying $60 a month. I was paying $20 a month. So that's $40 a month savings over the course of time just by having a negotiation, just by having a conversation. And then any other bundled services. So look at bundled services

that you have and see if you can negotiate down or reduce what you have. A lot of people have, the $20 Netflix and they only need the $8 Netflix. And that's why a lot of times people just let these things ride. But collectively, if you look at all these items collectively, you could save a couple hundred dollars. And that's what I'm talking about here. Because if you're not hitting your goals and you look at all of these items and go through the list and go down and list out exactly what I said and just make a little checklist and go through each of these bills, you could save a couple hundred dollars a month, which could result to a few thousand dollars a year, which results, as we just talked about, to well over six figures when you retire. And that's why this is so important.

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that's not bringing you value, you're not getting the service that you want. Be willing to walk away because during that negotiation, your willingness to walk away can be powerful in the long run. We'll talk about that here shortly. So the first thing you want to do during your research phase is just to obviously sign into all your accounts and gather the record. So see how much you're paying. Look down your bill and you're going to start reviewing things. So, for example, for your cell phone bill, you're going to start reviewing your data

usage. How much data are you actually using? Do you have unlimited data and you only use a few gigs a month? Well, look at that because a lot of times people are on their office Wi-Fi and then they're at home, they're on their home Wi-Fi, and they're using way less data than they think they are. And this is a very easy way to save money, is just looking at your data usage on your cell phone bill. But you can look at the same thing on your cable bill. Do you have HBO or Showtime? You don't even use that on your package. Look at things like that to see if you have

additional services that you don't need and you don't want to use, because that's the quickest way to just slash things off right away. There's no negotiation involved. You just tell them, hey, I don't use this. Take it off my bill. And then the next thing you want to do is research the prices and packages that the company gives to new customers, A, and then that they also give to competitors. So look at competitors, see what their prices are, but then also look at the company you're currently with and see what kind of pricing they give to new customers who come in that sign up for their services. So a big one with this is cable, because cable gives a tremendous discount to new customers, especially if they sign a one year, two year contract. But a lot of

times now, a lot of cable companies don't have contracts. So you can look at it a differential between, say, a new customer coming in and paying $89.99 for Wi-Fi and cable, or you as the older customer paying $150 a month for the same exact service. So look at that because you want to have that information ready to see if you have the opportunity to get that same pricing when you're going to walk away if you are willing to do that. And if their competitor's prices are similar for a new customer and or the same, that you always have that option to go to the competitor and be able to save that Cheta. So just be considering if you're willing to walk away from certain services. Now, if there's services that you love that you just do not want to walk away from, then fine, skip that one or go in and try to

negotiate and just know in the back of your head that you're not going to walk away if they say no. And then just kind of get everything organized. Write it down in a spreadsheet or write it down, jot it down on a piece of paper exactly what your plan is for each bill. Just so you have an idea and write down your options as well. So write down the competitor options, the new customer options, all those pieces just so you are organized and you have the information right in front of you when you start this negotiation process. And then just keep an extra piece of paper and a pen right next to you because the key to this is writing things down and taking cues that these people are speaking about as you're starting

your negotiation. You're going to want to take notes when you're being talked to just so you remember the information, especially if you're doing a couple bills a day. You want to make sure that you write down the information. So you remember exactly what they're talking about. And then the next piece is mental. So you just want to get in the right mindset. The way you want to approach these negotiations is very simple.

We're not doing this as a hardo. We're not trying to be hard with these people. We're actually going to go into it being extremely nice, but we're going to be persistent. So persistence with kindness is the recipe here. Because what you want to do is have these conversations because customer service reps deal with jerks all day long. So if you're a jerk to them, they're much less willing to help you because they deal with jerks all day long.

That's all they do is deal with people that are just yelling at them all day long. So if you show them a little bit of kindness, but also show them you're going to be firm and persistent to be able to do this, you're going to have a much better opportunity. And then along the same lines we just talked about, just be ready to leave. If you're ready to leave, just be in that mindset and know that a similar competitor has the same pricing. Yes, it may be somewhat of a hassle to have them come out and re-hook up your cable or switch over your cell phone plan.

It's a little bit of a hassle. But it's going to save you a tremendous amount of money in the, you. the long run. And then the last thing you want to do is just keep in the back of your head. You're not going to ask yes or no questions. What you're going to do is you're going to ask open-ended questions that don't allow a quick answer. So you want to ask open-ended questions where they kind of have to elaborate because you can take notes as they're talking and they're going to give you little cues to allow you to ask the right questions as you go along this process. For example, what can you do to decrease my monthly bill? That doesn't allow them to say yes or no.

that just has them have to elaborate and tell you exactly what they can do or what they can't do to decrease your bill or what can you do to get me a cheaper plan same type of question so write those two questions down because that's kind of how the open-endedness needs to be it needs to allow them to elaborate so you can take cues and be able to take those for yourself and help you in your negotiation and so now you're going to get into the negotiation phase so that what you're going to look at is you want to say upfront that you're considering considering canceling your service. And you want to be asked to transfer to the customer retention or cancel department. So if you're being transferred to the department that that does cancellations,

a lot of times they have more leeway to cut a deal because their job is to retain the customer. And they're going to give you a couple of options to allow you to be retained. So you stay on because it's much more valuable for them to keep you, obviously, than let you walk away. So for them, keeping you at a same price that is still somewhat profitable is in their best interest. So they're going to try to do that. So you want to be transferred right away to the cancellation department. And you can say something like, hey, I'm thinking about canceling my service because I just can't keep up with my monthly bill anymore. What can you do to help me out?

So that's all you have to ask them. It's an open-ended question and just see what they say. And as they're talking, take notes. See what prices they offer you. And if that works for you, great. Take it. You just saved money. But if it doesn't, then you can start busting out a couple of other extra things that you want to talk about here.

So if you're not happy with their offer, try talking about your customer history. Now, you can say something like, I've been a customer for seven years. I've never missed a payment. Look at my customer history. Can you help me out here? Because I just can't keep up with this bill. And this bill does not bring me enough value to keep. But if you can reduce this bill, I can stay on.

As you go through that process, you're going to listen to them. You're going to take additional notes as you're listening to them. And if they still aren't budging, then what you want to do is present the competitor's offer. Now, if a competitor has a much better offer than what you're paying right now, you want to present that to be able to show them that their offer is way higher than what you can go and get. This is the key. And this is what works for a lot of people. A lot of people bust this out first. But you want to bust this out a little bit later on. So the way to say this is I've been looking at my other options and they're giving new customers this deal. I also see that you are giving new customers a certain deal. What can you do for me here? That's the way you ask that question. It leaves it open-ended to see exactly how what they're going to be. going to do. And if they don't give it to you and you're willing to walk, then that gives you the opportunity to walk. But a lot of times they're going to give it to you because you're already threatening to cancel service in a nice way. Now remember, we're trying to keep this as nice as possible. A lot of times what these reps will do, and they may do this, is offer you an ancillary service

like six months of HBO or something like that. And if that works for you, take it. But what we're really trying to do here is we're trying to save money to increase your savings. And so for most people, that's not going to work because you didn't call them up to add six months of HBO. You called them up to reduce the costs on your bill. So what you can say is, thank you for your offer, but the problem isn't that I don't have HBO. It's that my monthly bill is just too high. What can you do to lower my bill? And a lot of times what you can do is you can get your bill lowered. And since they offered you that service, you can also get that service added on top. So you get a double benefit here. So you're going to get additional service and reduce your bill. So that's one of the double.

whammies that you can get when you're doing these negotiations. Now, if all else fails, ask them for a one-time credit, see if you can get a one-time credit to see if they can reduce your bill at least for one time until you figure out what you want to do next. Or if you know you're going to walk away, then you can go ahead and walk away and take a better deal. But if they do give you the deal, then just make sure you clarify the terms and talk through with the rep and make sure you have all the terms because sometimes they may try to lock you in to say a one-year contract. So you want to make sure you know all the terms before you do something like that. In addition, you want to make sure that you get an email confirmation on terms as well so that you can see the

contract as you're talking to them. And then after you accept the deal, just confirm all the changes have been made to your account. And once you confirm all those changes, this is going to allow you to be able to write them down and then again ask for that email confirmation. You always want an email confirmation every time you have these changes come up. Now, if you're unsuccessful, but you really want to stay with this company, you don't want to go through all the changes, then try another day and see if you get a different rep. And maybe that other rep will be more willing to help you or something may have changed a few days later where they're allowing more lenience for customers who are going to walk away. But if you don't want to stay, then don't stay with a company that's not

willing to negotiate with you. That's offering other customers better deals but won't give you a better deal. Just go to the next company and move on, especially if their service doesn't bring you much value. That allows you to go through the process and say, hey, all right, I'm going to walk. sometimes when you start saying that, that allows them to actually give you the deal that you're asking for. Sometimes they're playing hardball with you, which is fine. But what you're trying to do is just get that bill reduced. So you can do that any way possible right before you leave. A key thing here. And what a lot of people do is when they negotiate their bills, then they think they're done. But what you have to do is two things. First, every year you're going to continually

check your bills and you're going to repeat this process. Because this is going to allow you to have the long-term compound effects of this savings rate. But the real reason, and what a lot of people do, is they save this money, and then they just save the money and then go about their day. They don't actually save the money that they just saved on these bills. So they just let it commingle in their checking account and then go buy more trinkets at Target. You're not doing this to buy more stuff at Target. You're doing this to increase your wealth for the long term. So what you want to do is once you save a specific amount of money, you're going to set up automatic transfers out of your account for that savings and put it into your savings account or into your brokerage account so you can

start investing. Preferably, you want to save it so you can start investing. If you have an emergency fund especially, you want to always start saving it for your investments because you want that money to compound and grow so you can retain that six figures we're talking about. If you want to have that additional six figures, you have to invest that money. So make sure you set up automatic transfers that are going to allow you to keep the money that you just save. Do it right away. No matter how small it is, if you save $12, set up an automatic transfer in addition to $12, and send it to your savings or your investments. Because making these small adjustments over and over and over again will add up to big numbers.

And if you do this alongside looking at your big three, reducing your big three, saving a couple hundred dollars in your big three, then you save another $200 negotiating your bills and you increase your income, well, you're starting to change your saving rate by thousands of dollars a month by doing these things. And if you continually do this and you're consistent and persistent with doing this, you're going to build massive wealth just by doing these action items. That's why this is so important. That's why this is so cool because it can change your financial trajectory just by doing these action items. So make sure that you get that automatic savings transferred over to your brokerage accounts.

Thank you guys so much for listening. And if this is your first time listening, consider subscribing so you never miss an episode. And hey, if you get value out of this show, consider sharing it with a friend because we believe that every person in this world can build true wealth and build financial freedom. We want to share that message with everyone else because it starts right here. It starts with financial education. And it's not taught in high schools. It's not taught in colleges. So we want everyone to understand exactly how they too can build wealth and how they can go about building an amazing financial future. Again, thank you so much for listening. And I hope you guys

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