Retailers Require Extra Purchases – Or No Sale

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #21 in the series. 

Would you like a protection plan for your new laptop? Only $149!

Anyone who’s bought electronics from a retailer in the last decade knows the drill. Before you make your purchase and walk out the door, you have to withstand hard sells for extended warranties and protection plans. Upgrades and accessories. Even magazine subscriptions!

But a story I saw at Consumer Reports takes this idea to a new level. A few stores are engaging in a practice called “walking the customer”, where they refuse to sell you an item unless you also buy the extras. In this case the Consumer Reports shopper was trying to buy the new iPhone 5 at a Sprint store, but was required to buy accessories for a minimum of $84 as part of the deal.

In another example, several Staples customers have reported in recent years that to buy a laptop they had to purchase an extended warranty. If they refused, the sales associate would tell them the laptop wasn’t in stock! I’m not sure if Staples still has this program, but in the past they required sales associates to sell an average of $200 in extras for all computers they sold. The program was known as Market Basket, and if associates failed to meet the standard they received coaching and could even be fired. With requirements like this forced on the nation’s retail workers, it’s no wonder we as customers so often get the hard sell.

Retailers are getting desperate. Online sellers are eating into their margins. Instead of reinventing themselves by providing improved customer service or some other differentiating factor they’re turning to ripoff tactics like this.

If you’re ever told you must buy extra items to make a purchase, tell them to have a nice day. You vote with your dollars. Why reward a retailer that’s trying to stiff you?

What College Football Can Teach Us About Getting Out of Debt

Here we are in the midst of my favorite time of year. College football season has begun, which means my Saturdays are booked until early December. I love so many things about college football, but none more than cheering on my alma mater, West Virginia University. Watching the Old Gold and Blue rack up 40+ points regardless of the competition is just awesome.

College football is great in and of itself. But since this is a personal finance blog I have to ask: Could it also teach us a thing or two about reducing our debt loads?

I say yes. Here are 5 cool things college football can teach us about getting out of debt:

1. To complete a pass you have to know where your receivers are and where they’re headed

If receivers ran all over the field willy nilly, how would the quarterback be able to predict where to throw the ball? A quarterback has to know not only where his receivers are but where they are headed. This is where plays come in. Offensive coordinators design plays with a goal of advancing the ball down the field. Their ultimate goal is to score a touchdown.

You are the quarterback of your life. Your receivers are your debts. Get out a piece of paper and write down every one of your individual debts including the balances, interest rates and minimum payments. Your credit report will help greatly. When you have them all written down, rearrange them in order from smallest to largest. You will make nothing but minimum payments on all debts except your smallest one, at which you’ll throw every extra dollar you have. When that debt is gone you’ll throw everything at the next smallest and so on. This is called a debt snowball.

Until you have a clear view of the field, you’re not going to complete any passes. Your debts will languish in oblivion, steadily increasing thanks to interest.

Takeaway: Know your debts and snowball your way to success. 

2. To make big hits you have to bulk up

Athletes spend hours each week in the weight room. Why? They realize the more time they spend conditioning themselves before the game, the harder their hits will be during the game. A 250 pound running back is a lot more intimidating and harder to stop at full speed than one weighing 220. Building muscle is so important that most teams have a strength trainer on staff.

In a previous post I talked about an important muscle you have in your frugal toolbox known as the DG muscle. That’s Delayed Gratification for any newbies out there. The gist is that if you deny yourself pleasures now you’ll be better off down the road. In that post I talked about our decision to put off a furniture purchase until we had the money saved up. Avoiding the extra debt was well worth the upfront unpleasantness of hanging on to our old furniture a few months longer.

Just like the athletes, the more you flex this muscle the stronger it gets. When your DG muscle is primed and ready for action, you’ll start saving money everywhere. Take all the money you would have spent on “things” and chunk it towards your debt snowball. Now that’s a big hit.

Takeaway: Practice delayed gratification by flexing your DG muscle often, and put the savings toward your debt snowball. 

3. To handle game day pressure you have to focus

I’ve never played in front of 60,000 screaming fans, but I imagine it’s pretty intimidating. And some of the bigger games are shown on national television, so the pressure is even more intense. How does an 18-year-old handle these situations? In a word, focus. On the ball, on the game, on their coaches; anything but the pressure. A healthy dose of humility helps, but it’s increasingly rare these days.

Your game is your budget. You have a budget, right? Good, because it’s your road map to which you’ll refer back often. In case you haven’t noticed, a lot of products and services out there are clamoring for our dollars. There’s never a shortage of people ready and willing to take money off your hands. These are the screaming fans you’ll have to fight through on your journey to debt freedom.

You have to realize that we’re always one clever marketer’s pitch away from busting our budgets. One vulnerable moment is all it takes for them to swoop in. That’s why you see all those ads everywhere – it’s a numbers game. Advertisers know their ads aren’t going to work on everyone, or even most people. But they work on just enough people to make it worth their time.

Takeaway: Filter out the noise and stick to your budget

4. To graduate in 4 years you must excel in the classroom

You didn’t think every one of these would also apply to the NFL, did you?

College athletes have the double responsibility of preparing and performing in games and doing well in their classes. Many tremendous athletes have unraveled their careers in the classroom.

How do you spend your time outside of school or work? Mindlessly sitting in front of the TV isn’t going to get it done. You need to educate yourself in the basics: what affects your credit score, which types of insurance you need or don’t need, how investing works and so on. You need to be aware of exactly where every dollar is going each month. And you need to learn about creative ways to save outside of couponing and frequenting thrift stores.

Takeaway: Use your noggin to find creative ways to save on things you regularly buy

5. To create a winning strategy, the entire team must be on board

Coaches create plays and make game plans with the assumption that all players will contribute to the success of the team. We’ve all seen what can happen when one player becomes selfish and tries to take the game into his hands. The reality is it takes a team effort. Even great running backs need blocks from teammates to find the end zone.

On your team will be your family members. Your spouse, girlfriend, boyfriend, fiance, whatever. Everyone needs to agree to the plan and follow through with their individual parts. Two people pushing in opposite directions will get nowhere.

Getting out of debt is hard work. A team effort gives support, motivation and accountability to the process.

Takeaway: Gather a team of loved ones, agree to a plan, and support each other through the journey

What’s your favorite team? Can they teach you anything about getting out of debt?

Only Invest in What You Know

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #20 in the series. 

Investing is a topic that makes many of us squirm. It can be incredibly simple or mind-numbingly complex. What gets us in trouble so often is that we try to invest in something we don’t understand.

Warren Buffet, the billionaire investor, is famous for his practice of investing only within his “circle of competence”. To us common folk that means we should only invest in what we know.

During the big run up of tech stocks in the late ’90s, Buffet sat out of the game because technology wasn’t an area he was familiar with. Instead, he continued his tradition of buying undervalued stocks. As others were picking up the pieces after the bubble burst, Buffet maintained his strategy and limited his losses.

Think about the various types of investments available to us. Stock options, derivatives, commodities, exchange traded funds and so on. The reality is, these investments are very complex and aren’t suitable for most people.

Investment opportunities presented to us by friends, family, neighbors or people at church can likewise be difficult to understand. For every big Ponzi scheme reported in the news there are a hundred smaller ones that don’t make headlines. I’m not saying your pastor is going to approach you about earning 2% per day on your money, but the people who run these scams rely on trust and familiarity you may have with them. They know your guard is down.

Before doing any type of investing, understand how the company operates, how they earn money and who their main competitors are. Take a look at their financial statements. Is the business growing or is the customer base shrinking? What are the risks and opportunities in the industry? This knowledge helps you make an informed decision about whether you should invest.

Investment scams have been around since we started using money to pay for things. But never before have we seen the range and complexity of investment scams that exist today. The recession and the resulting loss of individual wealth have created a perfect opportunity for scam artists to craft false promises of oversized returns on your money. Because of their complexity, the new scams are more difficult to detect.

Remember Warren Buffet’s simple rule, and know that there are no shortcuts to building wealth. It comes little by little over many years and decades. The best way to avoid these scams is to do your research and stick with investments you understand.

The Secret to (Financial) Success

To lose weight, you eat less, eat well and exercise regularly. To become a better basketball player, you watch videos of pros and practice a lot.

But how do you achieve financial success?

Improvement in any area of life requires focused attention and a definition of success. If the goal is weight loss, you must be conscious of what’s going in your mouth and how much you’re exercising. You must also define how much weight you want to lose. In basketball or any other sport, you must practice (some experts say 10,000 hours is how long it takes to become an expert). You must also watch and play against those who are better than you.

To achieve success, you first need a definition of success. What does financial success mean to you? It’s different for every person. Does it mean being debt free? Financial independence? Retiring at 55? As long as it’s specific and attainable, there’s no wrong answer.

With success defined, you’re ready to make a plan. In it you’ll lay out your vision for the future, how you’ll get there and how long it will take. Your values should drive the plan. Do you tithe? Do you like having new things? Do you have other financial commitments to meet before you start the plan? Just like the old saying, “If you fail to plan, you plan to fail.”

A key piece of the plan should be creating separate savings accounts for your goals. Mint and SmartyPig are two excellent resources that help you visualize progress. I have a different method though. I use simple savings accounts with an online bank. Right now I have five accounts, one for each of my goals. My accounts are all together on the same page, so I can see at a glance how I’m doing. I’ve found that if it all sits in my checking account I’ll spend it quicker than Speedy Gonzales.

Control Your Cash

When you’re deep in debt creditors demand your money each month. When you don’t have values, anybody can come along and tell you what to do with your money because you shift with the tides. When you don’t have a vision and a plan, your money is at the mercy of spontaneous whims, spur of the moment decisions and unbridled emotion.

Do you want these to be controlling factors in your life? Not if you’re living with purpose! The secret to financial success is to define success and then direct your money there. 

Don’t let whims, flavors of the week or financial salespeople dictate what you do with your money. Define success and have a vision of what you want the future to look like. Then you’ll be in control of your cash and on the way to financial success.

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Door-to-Door Sellers Not Always What They Seem

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #19 in the series. 

When was the last time you bought something from a door-to-door salesperson?

We’re all familiar with the Girl Scouts who scour their neighborhoods, delighting us with their thin mints and samoas. I myself went door to door selling community discount cards to raise money for my high school soccer team almost a decade ago. Chances are most of us have had similar experiences. But as a buyer, how can you tell the difference between “innocent” sellers and those trying to take your money?

The Better Business Bureau has received an increase in complaints from people who’ve been scammed at their front door. The top complaint continues to be magazine sellers. They get people to bite by making up a sob story about being single parents, unemployed and living on the streets. They try to lock you into a multi-year subscription to popular national magazines, sometimes costing over $100. The prices they charge are generally well above the going rate for each magazine. You’re then told to wait 90 to 120 days for your first issue. In most cases no magazines show up and your money is gone.

Along with magazine sales, other common scam areas are roof repair, driveway sealing and windshield repair.

I recently heard about a new version of this scam. Scamsters pull up to your house and present you with examples of quality meats you can have delivered at regular intervals. No room to store them? No problem, we’ll give you a freezer! After signing the contract the meat you end up with is nothing like what you’re shown; it’s essentially garbage.

Be careful when anyone comes to your door trying to sell you something. Follow these tips to protect yourself:

  • Be safe. Don’t just open your door to anyone.
  • Watch out for high-pressure tactics. These people are trained to be very convincing and will even claim to represent a charity if all else fails. And if you’re told now will be your only chance to take advantage of this great offer, run.
  • Get everything in writing. If you decide to do business with the salesperson, make sure all terms of the deal are in writing, including the cancellation procedure.
  • Finally, the Federal Trade Commission has a Cooling-Off Rule, where you have three days to cancel a deal of $25 or more if it was made outside the seller’s permanent place of business. The seller then has 10 days to give you a full refund.

How to Negotiate Credit Card Debt with Collection Agencies

Negotiating with collection agencies can be a challenging task.

When your credit card company realizes you aren’t going to pay up, they sell your debt to a collector at pennies on the dollar. The collector’s goal is to recover the owed amount in full. They know this won’t happen every time, but they’re confident they can at least make their money back in most cases.

Even if you have no legal requirement to pay the debt, you may decide to for moral reasons. If that’s the case you want your payments going towards principal and not to interest. What many people don’t realize is that you can negotiate with the collection agency to lower the interest rate on your balance, helping you pay it off faster.

To negotiate successfully, follow these steps:

1. Prepare a negotiation plan: You don’t need a law degree to negotiate successfully. However, you do need a plan. Educate yourself and know your rights under the Fair Debt Collection Practices Act. Find out whether your account has passed the SOL or Statute of Limitations for your state. Knowing what the law says about debt collection practices puts you on a level playing field with the collector.

2. Calculate the amount you can pay: You need to calculate the amount you can afford to pay to the collection agency before you negotiate a settlement. The total balance and age of the account may determine the amount a collection agency will agree to accept. The debt collector may want you to make a lump sum payment, so you need to offer what you can afford to pay. You can also negotiate with the collector to set up a monthly payment.

3. Provide a settlement offer: Call the collection agency and tell them you want to settle your debt. Include in your offer the amount you can pay and any evidence of hardship that is stopping you from making full payments on the debt. Be polite but firm throughout the process. As a last resort, inform them you may be compelled to file bankruptcy. That might make their ears perk up.

If they don’t cooperate, send a certified letter detailing the terms of your offer.

4. Require the account be reported as “Paid in Full”: What you want to see on your credit report is “Paid as Agreed” or “Paid in Full” instead of “Settled.” If the collection agency reports the account as “Settled” it will adversely affect your credit report.

5. Get the terms of the agreement in writing: When the collection agency approves your offer make sure you get the terms of the agreement in writing before you submit any payment. Before signing the agreement make sure you read it completely. If the terms meet your requirements, send payment via money order. Never give a collection agency your checking account or credit card numbers.

Follow these tips to lower your interest rate, settle your balance and pay off your debt faster.

Author bio:
My name is Marie Nelson. I am a finance writer from California. I write on debt related issues as well and to post on debt relief to personal finance blogs. Click here for more information.