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Anchor Price Your Salary

: Image by Dalboz17 via Flickr

Conventional wisdom says that, when negotiating your salary or a raise, you should make whatever crazy ninja maneuvers it takes to get the other person to name a number first.

Horse pellets.

Have you ever watched an infomercial? Those masters of of impulse marketing geared towards insomniacs, invalids, and inebriates?

“How much would you pay for this fabulous meat tenderizer/eyelash waxer? $399? $299? No! If you call within the next 73 seconds, we will let you take this home for the low, low price of just $99.99!”

That’s the magic of anchor pricing.

The first number you hear is the number you will base all further numbers on. If you hear a high number, other lower numbers will feel much lower by comparison. The number doesn’t even have to be about money.

There was a study done that had the subjects compare a price to the last two digits of their social security numbers. Those with higher digits found higher prices to be acceptable, while those with lower prices only accepted cheaper prices.

What does an infomercial marketing ploy have to do with your salary?

If you are negotiating your salary and your potential employer gives a lowball offer, every higher counteroffer after that will much, much higher than than it would otherwise. On the other hand, if you start with your “perfect” salary, they amount you will be happy to settle for won’t seem to be nearly as high to the employer. At the same time, you will be less likely to accept a lowball offer if you set your anchor price high.

For example, if you are looking to make $50,000:

The employer offers you $40,000. $60,000 seems too high by comparison, so you counter with $50,000, then compromise and settler for $45,000. Or, you could start at $60,000, making the employer feel that $40,000 is too low, so he counters with $45,000, leaving a compromise at $52,000. That’s a hypothetical $7,000 boost, just for bucking conventional wisdom and taking a cue from the marketing industry.

How have you negotiated your salary?

5 Reasons Why I Splurge On Travel

Misc

Guest Post Author Bio: Miss T blogs at Prairie EcoThrifter. She grew up in the Canadian prairies and still lives there today. She is passionate about saving money, being healthy, looking out for our environment, and most of all having fun. Her blog shares tips on how you too can live a green, debt free, and fun life.

This week I am participating in a Yakezie blog swap where I am to answer the question ” Name a time when you splurged and were glad you did.” I had to seriously think about this for a minute and then it came to me. What do I consistently spend my money on that brings me the most enjoyment? Answer: Travel.

To say I love to travel would be an understatement. Travel for me is a life changing experience that I desire to re-live over and over again. I can think of a million reasons why I love to travel, but I thought I would boil it down to five.

1. Learn about myself. When I travel I gain a deeper understanding of myself and the world in general. Much of the experience is dependent on how different the environment is from what I am used to. When I traveled to Europe the first time, I got to try some different food and see how great it was to have a siesta in the middle of the day, but the transition was relatively painless. When I traveled to Central America last year for my honeymoon, I was a lot more out of my comfort zone. I was sleeping with tarantulas and geckos and trying food I couldn’t even pronounce. Plus, I couldn’t speak the language.

When I am in this kind of situation, I encounter things that I have never encountered before. I am forced to be on the alert because I don’t have any prior knowledge to rely on. Since everything is new, I am automatically forced to try to make sense of it all.

For many of us we have never really looked inside ourselves and examined what we are made of. When we are somewhere new, we have nowhere to hide. This is the point where you become really intimate with the ideas you have of yourself, of your ego, of life, which you may have been really identified to, and derived your sense of self from.

Your ego is essentially your self image; it’s the persona you display to society. Your ego survives only by constantly seeking approval from that which it wants to identify with. This is the society you are raised in. What happens when your family, friends, and your typical environment is not there to reinforce the ideas you have of your self? You ego becomes shaky; it starts to lose it’s hold on you. By traveling to the unknown, your ego falls apart and the true you is given the chance to emerge.

You begin to challenge and question everything you have ever believed. If you can be brave and not run away and use this as way to grow, you will see that all your beliefs belong to society and that they were never really yours to begin with. This can be extremely scary, liberating, nauseating and a million other things all at the same time.

I remember going through this very process when I traveled to Cuba. I knew intellectually that there were people in this world that weren’t as fortunate as me, but I was never able to fully understand that until I saw how some people lived in Cuba. I couldn’t help but reflect on what it would be like to never be able to own a home because the government owned everything and personal freedom didn’t exist. I wondered what it would be like to be so poor that I would have to walk around grimy city streets barefoot because I couldn’t afford shoes and it wouldn’t matter how many cuts I would get from broken glass because I had to get myself to work everyday on foot. That trip really shattered my ego and my mental models and when I arrived back home, I approached my own life very differently.

2. To do what I love. Interestingly, there are very few other areas of my life where I feel more at home and happy then when I am traveling. I really enjoy experiencing the unknown and all of the possibilities it has to offer. I guess I feel totally free; free from obligation and expectation. I am able to explore on my own terms and be who I want to be without negative consequences. When I am planning a trip, my excitement consumes me. I can’t help but wonder; what am I going to see? Who am I going to meet? What am I going to learn?

3. Re-live my youth. Unlike many of my peers, I skipped the university experience. When I graduated high school I went straight to working full time at my family’s business. It wasn’t until later in my life that I went back to university and got an education and got the job that I have now. I never had the opportunity to have 4 months off for 4 years and travel when I was younger. I was too focused on making money and buying my first house. I wanted to be an adult as fast I could.

Traveling now allows me to capture some of those stolen moments. The best thing is I have more money and resources behind me now so I can travel without incurring debt and causing financial strain which would have happened if I had done it in my younger days. I also have a partner to travel with, my husband, which allows us to grow and experience with each other by our side.

4. Redefine my boundaries. Being in a completely different environment than what I am used to excites me. I am somehow willing to try anything, regardless of what the consequences can be. When I was in Europe for the first time, I decided to try para-gliding in Austria. It was an amazing experience. However, if you would have asked me when I was still at home if it would run off of a mountain and free fall to the ground, I would probably have said “no way”. Being somewhere different allowed me to push my boundaries and cast my fears aside. Not only was it liberating and a ton of fun but it has made me push myself harder and further in other areas of my life which has only led to success.

5. Enhance my education. Learning through textbooks is not the same as learning hands on. I much prefer learning through experience. I find I never forget what I experience whereas I can forget what I have read.

Traveling allows me to enhance my education of the world around me through experience. I get to see first hand how something is made or used, or taste a food that I have never heard about before. I get to experience history by walking through castles and basilicas instead of reading about it or watching a documentary on TV. I get to discover the world for what it is first hand instead of through someone else’s eyes. I am able to learn about something honestly instead of through a tainted image painted by someone else.

The knowledge I have gained through my travels to date has enhanced my life and opportunities in so many ways. I have never learned something that hasn’t proven useful.

Travel isn’t cheap and to many is viewed as a luxury but to me it is something worth splurging on from one year to the next. The personal gains I get from my investment are invaluable!

Future Dreams

Relationships

While jogging with my wife a few days ago, we had a conversation that we haven’t had in years. We discussed our dreams.

It’s an important conversation for couples to have. What are your hopes? What are your dreams? Where do you want to be in 10 years? In 20? In 50? Planning for the future gives you a map for the present.

My wife and I hadn’t had this conversation in years. A few days ago, we did. Our life-goals are simple and achievable.

I want to leave the corporate world and support my family with writing and the training classes I do. I want a chunk of land outside of any major metropolitan area, but close enough for the entertainment and shopping. I want enough land to expand my classes on my own property, relying on no one.

My wife wants enough land to have some horses. It was unspoken, but I think she wants my goals to take off so they can support her goals, too.

We want a comfortable retirement and we want to help the kids with college.

We’re a bit behind the game for college funding. That’s ok, though. There is nothing wrong with a kid working his way through college and learning those life lessons.

We are also behind on the retirement. But, if I can support us doing the things I love, I don’t need $X million. Retirement isn’t a cessation of activity, it is taking the time to do the things you love on your own schedule. If writing a book while sitting on my private range is enough to fund our life, that’s the perfect retirement.

UFC: Salary or Prize Purse

Business

Ultimate Fighting Championship (Photo credit: ATempletonPhoto.com)

A gig in the UFC must be pretty lucrative, right? I mean, look at the top UFC earner Chuck Liddell. His lifetime total pay-per-view career bonus earnings since is estimated at over $4.3 million. Tito Ortiz isn’t far behind with just over $4 million. And what do the lower ranking fighters earn? Two thirds of them are estimated to make less than $100,000 per year. That’s gross salary. Take out insurance, taxes, equipment, and license fees and the payout isn’t as sweet at the bottom. Some office drones take home more money than UFC fighters do. And those drones don’t have anything close to the job hazards associated with the UFC.

So what gives? Why the huge discrepancy? They all get the shit kicked out of them at one time or another, right? MMA in general, UFC in particular, has been criticized for paying athletes much lower salaries than similar sports like boxing. The controversy led UFC President Dana White to defend the salary structure of UFC, in part saying that no one knows exactly how much top fighters earn because the fighters don’t want anyone to know how much they earn. He went on to say that the UFC pay structure “smokes” boxing’s pay structure, yet gives little insight into such insight.

So what do the fighters make? President White jumps around the issue in a Fox 11 Sports Interview from September 2012. While he insists that there’s a guaranteed amount, he dances around the question, insisting that “the guys get paid a lot more money than what you’re seeing on things.” He admits that bonuses and incentives make up part of the pay structure. Obviously the amount of the prize money correlates directly with the hype surrounding the fight.

How much? Well, not all bonuses are made public. In fact, the athletic commissions didn’t even release prize purse information until 2004, so it’s impossible to account for UFC 45 back. And currently the only prize purse amounts that are released are Fight of the Night, Knockout of the Night, and Submission of the Night. The rest of the bonuses beyond that, including sponsorship money, pay-per-view cuts, and other “locker room” bonuses aren’t even publicly reported. But new UFC rules require sponsors to pay the UFC for the right to provide sponsorship for fighters, a stipulation that leaves less money that goes directly to the fighter.

Dana White says that the fighters are free to share their income figures if they like; their contracts do not gag them from releasing the amounts. Yet it’s difficult to pin down the exact amount the UFC grosses each year from ticket sales, pay-per-views, merchandising, DVD sales, and video games. Fighters like Jon Fitch and Tim Kennedy have publicly spoken out against UFC’s pay schedules. In fact, Kennedy stated that emptying trash cans pays better than the UFC. It’s further proof that it’s all about the purse.

Living the High Life

Finance, Life

This post is part of the Yakezie Blog swap. I have swapped this week with Eric at Narrow Bridge Finance. This is a post from Eric discussing the theme: What Motivates You to be Financially Responsible? Please take a moment to read my post, Monsters, at Eric’s site.

Unlike my blogger buddy Jason here at LiveRealNow, I have no family. Quite the opposite in fact, I am loving the single guy life. I don’t have much debt. I love going to the bars and partying on the weekends. I have a good job. I have relatively low expenses. Things are good.

So what is my motivation to be financially responsible? It is two-fold. First, I want to be able to keep doing whatever I want whenever I want without worrying about money. Second, I do want to settle down someday in the not too distant future and make sure I have a good foundation to start the next chapter of my life.

I Want to Do Whatever I Want Whenever I Want

Is that selfish? Probably. But who cares? I don’t have kids, I don’t have a wife. I don’t even have a girlfriend at the moment. I do make an effort to donate to local organizations I believe in and I am happy to have friends over for a pre-game and buy a round of drinks, but that is as far as my obligation to others goes.

Doing whatever I want is not always cheap. I like going to concerts. I enjoy nightclubs. I love traveling and exploring new places. $80 tickets, a $15 cover plus drinks, and a $500 trip are fairly common occurrences in my life.

As you know, money doesn’t grow on trees. I have to work hard to pay for the things I want and the experiences I have. I am totally okay with that. But I have to plan now to be able to do what I want later.

I live in a modest and inexpensive apartment. I try to keep my food budget low. I bought a small car that would be reliable, low maintenance, and fuel efficient.

By cutting out wasteful spending and thinking before I spend, I am able to do pretty much whatever I want. If you have the same goal, dive into the depths of your budget. Dig in deep and see where you are spending money. Not to be cliché, but the ‘latte factor’ is a big deal. Those stops at Starbucks, afternoon snacks, energy drinks, cable bills, and other cash drains might not be worth it. If you don’t really, really enjoy it and get pleasure from it, why would you spend money on it?

My Future – Family, Travel, and Early Retirement

I am 26. I am at that point where I am going on a lot of dates. I am meeting a lot of great girls. One of these days, probably when I least expect it, I will fall madly in love and get married. You know the story.

My short term dream is a life of travel and urban living. My long term dream is to get married to a hot Jewish girl (I am Jewish, so it makes sense to “keep it in the tribe”) and have two or three kids. Once kids are in the picture, we move out from the urban fun areas and settle down in the burbs.

But just because I will give up the party life does not mean I have to give up my passions. I want to show my kids the world, give them amazing life experiences, and help them grow to hopefully be even more awesome than me, which is a hard bar to beat.

To do all of that and reach financial freedom, I have to set my goals and work to achieve them. (In case you were wondering, Jason recently wrote a great post on financial goal setting. If you have not read it yet, you really should.)

To get there, I am already working on saving and investing. I am contributing over 10% of my gross income at work to my retirement plans. I am working hard to pay down my student loans and save up a down payment fund. I am planning ahead and saving for my future goals.

How to Reach Your Goals

You probably have financial and life goals too. What are you doing to get there?

We can always tell people about our dreams. However, unlike when you are two years old and dream of being an astronaut police officer that lives in a toy store with an ice cream machine and a McDonald’s in it, your dreams today can be a reality.

With few exceptions, every person can reach their goals. Do you want to retire at 40? Take steps to save and create residual income streams. Do you want to travel in space? Save up to buy a ticket on Virgin Galactic. Do you not have enough money? Diversify your income streams and make more. Do you feel chained down by your traditional desk job that you hate? Start a business and transition to self employment.

Yes, it is easier said than done. But you will never reach your goals unless you take solid steps to get there. Don’t just dream it, live it.

Please take a moment to head over to Eric’s site, Narrow Bridge Finance. While you’re there, be sure to subscribe. You don’t want to miss his posts.

Dreams

Finance, Life

Ever since she was a little girl, my wife has wanted to be a horse. Err, work with horses.

The problem is that most jobs working with horses pay horse-crap. It’s hard to raise a family on a stablehand’s income.

Her alternative was to own horses. This comes with a different set of problems. The biggest problem is that we live on 1/8 of an acre in a first-ring suburb. That’s not a lot of room to graze, though I would be willing to give up my spot in the garage.

I rock like that.

Boarding a horse costs a minimum of $200 per month. Two girls means two horses, otherwise, they won’t both be able to score in the saddle club. For the math challenged, that’s $400 per month, plus about $300 in preventative vet care per year.

$5100 for a year of boarding an extremely obsolete car.

Then, you need a trailer to get the horse to shows. You need saddles and reins and and short-legged stirrups and feedbags and muck-rakes and brushes and combs and hoof-cleaning-thingies and other stuff that will catch me by surprise for years to come.

Expensive.

My rough estimate is that it costs at least $10,000 to get into horse ownership, and that’s not counting the horse itself.

You can buy a horse for well under $1000 if you aren’t concerned about registration or speed. A 15 year old horse can last 10-15 more years, so it’s not money down the drain.

That’s $12,000 to get in and $5100 per year to stay in. Minimum.

Never let it be said that I’m not a pushover. Last month, we bought an SUV that can pull a horse trailer. Last weekend, we bought the trailer. That’s two major steps towards making my wife’s dreams come true. The rest of the plan culminates in a hobby farm in the sticks.

There are several steps in between.

I just need to put the brakes on every other step. We’ve been offered the free use of one pony next season, and we may be able to get another for the same price. Beyond that, we need to be patient. There will be no ponies purchased until the new truck and old mortgage are paid.

Period.

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