When you go to a flea market, you expect to haggle. It’s part of the experience. Traders rarely take offence at the negotiation, and even their occasionally horrified reactions feel like part of the ritual. It’s almost rude not to haggle.
The unspoken mutual understanding is that you come away feeling satisfied because you’ve saved some money while the trader made a sale at a price that is not insulting. If you do buy something at the original asking price, you do it with a sense of meekness.
Weirdly, though, we seem to be meeker when the purchase is major. At flea markets we’re making a relatively affordable, once-off purchase of something that will likely last a few years. But when it comes to things we can’t pay for in cash, repeat expenses that may be lifelong, we don’t have the same haggling mindset. If anything, it seems that the bigger the item, the smaller the haggle.
Take home loans. Many of us simply accept whatever interest rate the bank charges. Some will get a few quotes to compare, take the best offer and leave it at that. We seldom go back again and ask for a better rate. Once the deal is done, so are we … for the next 20-25 years.
Very few of us ask the bank to revisit our interest rate every year or two, something we are entitled to and should feel compelled to do. On a bond of R1 million a 0.5% lower interest rate equates to a saving of around R400 a month. That saving can add up to hundreds of thousands over the lifetime of the bond.
Is there an investment that’s bigger than a home? Well, our retirement is something we ideally invest in for much longer than 20 years and it is arguably more valuable. Hands up anyone who haggled, or knows someone who haggled, over the fees they pay on their retirement investment. Anyone?
The vast majority of us don’t give a second (or even a first) thought to investing fees. Possibly because money doesn’t physically change hands like it does at a flea market.
Most people pay around 3% a year for their retirement savings. It sounds like a small number until you realise that on an investment worth R1 million, you pay R30 000. That 3% is charged every year, and over 40 years you would end up paying more in fees than you originally put in. It doesn’t only affect what you pay. It decreases how much money there is to grow, and how much that growth compounds, and how much money you end up with. You could be paying 1% in fees, which is a third of what most people pay and can mean twice as much money when you retire.
So, do you want to save money on your retirement investment? Shop around. Challenge your advisor. Ask your financial institution to drop its fee. Leave and go to a new financial institution. Get a comparative quote. Do what you have to do to get your haggle on.
