The coronavirus outbreak has altered the lives and finances of Americans across the country with more than 33 million people filing for initial jobless claims as they scramble to make this month's rent and pay bills. Many are left wondering how they can afford these rent and credit card payments during a pandemic.
Ramit Sethi, personal finance expert and author of the New York Times bestselling book "I Will Teach You To Be Rich," says it is not too late to negotiate your finances and that right now, people should.
"There are a lot of people who are struggling with their finances and companies know this," Sethi, 37, told TODAY by phone. "Companies are willing to cut deals in certain cases so that they can collect some amount of money and retain you as a customer."
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So, how do you negotiate and adjust your finances? Sethi suggests following this three-part strategy:
- Cut costs
- Earn more
- Optimize your spending
"Too often people try to negotiate or cut back on everything," he said. "They will try to cut back on $3 lattes; they'll try to cut back on dishwasher fluid; they'll try to cut back on everything. That becomes very frustrating because it becomes difficult to save when you are cutting $3 here and $4 there."
How do I cut costs?
"I had somebody one month ago ask, 'You know I have a wedding in August — do you think I should cancel it or not?'" Sethi said. "My answer was this: You should cancel it. As someone who has planned a large wedding, I know how painful the prospect of canceling it is. But at a time like this, money in your pocket now is worth more than money in your pocket later."
Expenses that have been planned for the rest of the year, such as gym memberships and family vacations, would be more beneficial to use now. Look at what you have planned for the rest of the year and evaluate how those funds could better serve you today.
If you are worried about cancellation fees or not getting a full refund for your trip, Sethi has a simple response: "You've got to get over that." He added, "At this point, it is really important to focus on building some security and emergency funds."
How do I earn more?
"There is a limit to how much you can cut," said Sethi, "but no limit to how much you can earn." Sethi advises that anyone who can file for unemployment and for business owners to file for the Paycheck Protection Program.
Another way to earn more is to find a business idea and turn it into income. That's what Greg Isenberg did when he founded the website You Probably Need a Haircut, a virtual barbershop that now helps barbers make money while social distancing. Through Sethi's online course, Earnable, users can learn how to start a business today.
"We had one of our students who does a painting class — like you would go on a date night with wine and painting — she taught it virtually through Zoom," Sethi said. "And she made $100 the first time she did it. What an amazing idea. Whether you know how to paint, whether you know how to make plans for children, whether you are just doing a trivia night, there are so many ways to create income on the side right now."
How can I optimize my spending?
When looking to negotiate your finances, Sethi recommends starting with your cable company, cellphone company, credit card company, student loan company and your landlord if you rent.
Before reaching out to any of these companies to delay a payment, get a fee waived or have a payment discounted, there are two things you need to do to prepare.
1. Do the basic research on your accounts.
It is very important to know information about your relationship with the company, such as how long you have been a customer or if they have negotiated with you before.
"Front-load the work — 80% of the work is done before you ever make that phone call," Sethi said.
2. Be aware of other options.
"If you have a cellphone and you call (your company) up and say, 'Hey I'd like to see what options you have for me,' and they say nothing, you can then say, 'Look I understand that. This competitor is offering me a better price. Can you switch me to your customer retention department?'" Sethi said.
Remember that the negotiations you have with these companies are business discussions, not personal. Sethi says that your company cares about what the competitive options are. If you point them out, they may be more willing to give you a discount or waive a fee to keep you as a customer.
What should I say when negotiating?
Sethi advises that people follow this script:
"Hi, my name is Ramit. I've been a good customer for three years. I'm having financial difficulty due to coronavirus and I'd like to hear what options you have available for someone like me."
If this works, consider it an achievement in which you are taking control of the negotiation and your money. If not, Sethi suggests asking to speak with the customer retention department.
"Sometimes, that part of the company is more empowered to give you reductions or discounts," he said. "Keep that in your back pocket if you need to."
When talking with a landlord about rent, Sethi again emphasizes that this relationship is still a business arrangement (and landlords don't want to take you to court). If you are dealing with difficulties due to COVID-19, ask what options can be made available to you. But everyone won't say yes.
"I think renters should also know that landlords aren't under any obligation to do that," Sethi continued. "Negotiation is a dance. You should ask, but no one is under any obligation to say yes."