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Tips For Better Negotiations Tips For Better Negotiations
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Tips For Better Negotiations

LearnVest •  August 19, 2015 | Your Finances

No one likes talking about money—and we tend to like negotiating for it even less.

That’s why the thought of buying a new car, or simply asking for a raise can leave even the most self-assured with sweaty palms.

The thing about negotiating, though, is that there are tricks to the trade, and if it’s done right, you can walk away with more money in your pocket (or your paycheck).

But first you need to know some of the psychological pitfalls we all tend to fall into when it comes to big-league haggling.

LearnVest talked to two experts—including a professional mediator—to help you figure out what not to do, and more importantly, what you should do when negotiating for everything from a salary bump to a new set of wheels.

Negotiation Scenario #1: Asking for a Raise

You’re sure you deserve one, but this is a tricky thing to ask for given that you don’t want to rock the boat with your boss.

“You are negotiating with a person with whom you have a long-term relationship, and this kind of negotiation should be cooperative and ‘win-win,’” says Ed Wertheim, a professional mediator and associate professor of management and organizational development at the D’Amore-McKim School of Business at Northeastern University.

First, “remember that you can disagree without being disagreeable,” Wertheim says. And that’s key because (surprise!) you’re unlikely to get a resounding “Sure, how much more money would you like?” as a first response from your supervisor.

Here’s the thing: Most people would take an initial no at face value and walk away because they’re uncomfortable with conflict, says Ramit Sethi, the New York Times best-selling author of “I Will Teach You to Be Rich.”

But accepting defeat that easily is laughable for a skilled negotiator.

In other words, hearing “You know, we’re in a rough spot with the company/the economy, so I can’t really discuss it this year” should be the beginning of your conversation—not the end.

Your goal is to be polite and proactive and remember that negotiations aren’t personal.

Then take this three-pronged approach: First, frame your request in light of how your contributions have benefited the company’s bottom line to date. Then do some research to determine your value in the marketplace, such as “how much someone in IT two years out of school should earn,” Wertheim says. “Try to look for an objective standard of fairness.”

Finally, if you still get a no, don’t walk away. “Ask if there are additional responsibilities you can take on, or if you can be evaluated in six months,” Wertheim says. “Then put that request in writing.”

Negotiation Scenario #2: Accepting a New Job

Getting a job offer is a heady thing: Most people are so thrilled to receive one, they lose their heads and leave money on the table.

And even a small sum can make a huge difference in the long term.

“If you get $5,000 more a year, you’ll earn an additional $78,227 in 10 years, and $1,398,905 over 40 years,” Sethi says. “The first time I negotiated my salary, I stumbled through it … and bombed.”

One key to successful negotiating, Sethi says, lies in mastering your “competence triggers,” or “the subtle psychological signs that demonstrate to other people that we’re worthy of respect, attention and a bigger paycheck.”

The biggest mistake we tend to make? “Most people don’t even realize that it is a negotiation,” he says. And unlike when you’re asking for a pay raise, you’re negotiating with HR this time, not your hiring manager. “They do this for a living,” Sethi says. “It’s not personal, you’re parrying.”

For example, if a company asks what you’re currently making, or your ideal salary, Sethi says, never give a straightforward number, which can put you in a box and make it harder to negotiate later.

“High-quality applicants will reply with, ‘Well, I’m sure we can talk about salary a little further down the line,’” he says. “‘Right now, I’d like to make sure the position is a good fit for you and for me.’” Top candidates, he stresses, know they have plenty of other offers out there—or at least act as if they do.

And keep in mind that salary isn’t the only thing that’s negotiable. “Companies often use the phrase ‘There’s no flexibility’ as a scare tactic,” he explains.

There are many elements that can make up a compensation package, such as tuition reimbursement for an MBA program, added vacation time, stock options or working from home on Fridays. “There may be things that are valuable to you that are OK with the company,” Wertheim says.

Negotiation Scenario #3: Buying a Car

Nothing strikes fear in the hearts of the negotiating-averse like the idea of buying or leasing new wheels … for good reason.

“When looking at a big purchase, like a car, a common pitfall is what psychologists call the ‘escalation of commitment,’” Wertheim says.

The new car undoubtedly is going to be better than what we have. And once you go on a test drive, you start to imagine your new, improved life driving that vehicle. “Think of it as being on hold on the phone,” he explains. “We get increasingly committed as we invest in something.”

To avoid falling into this trap, set what Wertheim calls a “walk away” price by doing some research to determine the fair market price of the vehicle. If the figure comes in any higher than that, your dream car stays on the lot.

Another trick is to use a salesman’s best-kept secrets against him.

“Most dealers have what we call the ‘exploding offer,’” Wertheim says. “It’s only good today.” So you can test their mettle by simply walking away. “You have to accept that you may lose the deal,” he says, “but chances are they’ll be glad to take your check Monday instead of today.”

Dealers also rely on the “deferred authority tactic,” also known as the good cop/bad cop routine. “The good cop salesman will say, ‘I’ve got to talk to my manager,’” Wertheim says. “When he comes back, he’ll say, ‘I thought it was a good offer, but my boss said if I brought back an offer like that again, I’d be out on the street.’”

Fortunately, this technique, too, can be adapted to your purposes. If the number he comes back with isn’t suitable, don’t cave. Instead, delay by saying, “I’m sorry, but I’ll have to talk to my spouse before making this decision, so I’ll have to take a day to think about it.”

Odds are that “final offer” will get better with time.

Negotiation Scenario #4: Purchasing a Home

This is the humdinger of financial negotiations. For most people, it’s an emotional decision, and likely the largest outlay of cash they’ll make in a lifetime.

The problem?

“We fall in love with a house, and we forget about the plan we made—and the limit we set of how much we’d spend,” Wertheim says.

So the first thing you need to do is your research.

“Know the market,” he says. “Unlike with a car purchase, if you delay by a couple of days in a tight market, you could lose the house.”

You’ll also want to look closely at “comps,” or what other comparable properties in the area have sold for, before making an offer, so you’re basing your bid on fact—not your fantasy life.

And be sure to factor in all of the costs—from your mortgage to condo fees or property taxes, if applicable—to make sure you’re still within budget.

Then resolve not to lose your resolve, because you may fall in and out of love many times. “I bought a house a long time ago,” Wertheim says. “But I remember calling my father-in-law, defeated, after losing house after house.”

And that, he says, is when many people tend to make mistakes. So as hard as it may be, try to stick to your wish list—and your set price.

“Buying a house is a very emotional thing,” he says. “But we have a saying in negotiating: If you can’t walk, you can’t negotiate. If you fall in love with a job, or a person, or a house, you can’t negotiate.”

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LearnVest, Inc. is owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin.


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