If you’d like to join me in helping Lakota families and/or rural libraries this year, please read this post. Over 6 weeks in 2019, we raised $2669.94 for the Lakota families, touching 27 lives. What can we do in 2020? Current total: Lakota, $1589.82; Rural libraries, $321.62. 1. While I was grumpy that I’d miscalculated […]
Yes, it’s your biggest dream and a worthy goal. Only buy the things you want and need when they are on sale and always get the best deal when you do it! If only, right? Well, you may not be able to guarantee it, but you can at least try. And that leads me to my mantra and it must always be yours too: Never, ever buy any appliance, furniture, or any other item if it’s not on sale!
That must be your number rule if you wanna be “a star in my show”. And guess what? Retailers know you understand that and so they will use every way they can think of to trick you!
You can score an even bigger and better success rate if and when you are prepared for the shopping experience. Yes, it will take some knowledge and a little effort. It is your money we’re talking about here, so it’s worth your while to try to save it!
Timing is always a big part of getting a great deal and there are seasons to it just like it says in the bible (“To everything there is a season”). If you know the calendar to buy on sale, you will spend less on important items and you’ll stretch your dollars much further. That will mean less debt and the less debt you have, the happier you’ll feel. Whether you shop locally or online, I’ve put together a handy guide for the best times of the year to buy everything right here.
When to Save Money on the “Big” Things
Believe it or not, you can save thousands of dollars when making large purchases at the right time of year. Winter is often the best time to buy “big” or anything really because weather often dictates what retailers will do. If you’re looking at buying your first home or car, the winter months provide the greatest opportunities because other than “the holidays” from Thanksgiving to Christmas, the stores are often pretty slow.
Cars and trucks: Car dealers must move vehicles out at the end of the year and so many car dealerships try to make their yearly quota goal then. The best time to buy a new vehicle is at the end of the year and even more specifically, the end of the month. In November and December, dealers are desperate to move inventory because newer models are rolling in and the older cars are now “costly inventory” and every day they are costing the dealer more and more. That’s when and why they offer deeper discounts and other incentives. The more you understand that, the more leverage you have when you buy.
Houses: In spring and summer, the price of houses goes up because there is more competition from buyers. Purchasing a home in winter can get you an amazing price. If possible, try to look for homes around Christmas time. There is much less competition in the market, and sellers may even feel more generous because of the “Christmas spirit”.
Saving money on these kinds of big things reduces the amount of debt you have because you are generally making these purchases with borrowed money (loans and mortgages). After saving more money, you can afford other important items that you need and that can make you very happy.
When to Shop for Home Accessories
The winter months are again an excellent time to brighten up the home with new décor and furniture. Take advantage of bad weather and even a big snowstorm and check out exciting décor ideas when that happens. Retailers almost always promote during or right after any kind of big storm because they are trying to make up for lost sales that they missed. It works for both parties, more sales are made and more bargains are had.
Linens and bedding: Give your bedroom a relaxing atmosphere with fresh linens and colorful bedding. In January and in July many retail stores offer a “white sale” on blankets, sheets, duvet covers, and complete bed sets, etc.
Mattresses: Few things are as important in life as a comfy mattress. Whether you want something firm or soft, President’s Day in February is the best time to buy. Great discounts make it easier to splurge on king size mattresses. Yes, they are promoted all year long, but February traditionally is the lowest pricing of the year!
Indoor furniture: Buying a new sofa is an easy way to completely reinvent your living room. Accent furniture has a huge impact on the way a bedroom, living room, or dining room feels. Retailers get new styles in February, so January is the best time of year to find discounts on indoor furniture. Find your favorite coffee tables, dining room tables, loveseats, sectionals, and beds for less. Out with last year’s styles and in with this year’s styles.
Outdoor furniture: If you want to buy new patio furniture, September begins the sales that ultimately ends as winter begins. Usually deals of up to 70% off on popular styles can be found. When searching for larger items, make sure you know if prices include delivery fees to your home so you are not surprised when it’s added onto the deal.
Appliances: Do you have your eye on a state-of-the-art stainless-steel refrigerator? Memorial Day sales or waiting until November gets you the best deals. If you’re willing to wait in store lines, Black Friday is an amazing time to buy any high-quality appliances. This includes refrigerators, washers, dryers, microwaves, dishwashers, and ranges/ovens. The pressure to sell items mounts because all of the “new” items for next year are on their way to the stores in January and February. That again means that they have to make room for them. The best times are when appliances are dominant in ads.
Things to Buy For the Kids
Seeing happy smiles is irresistible for moms and dads. As long as you plan ahead, you can buy things your kids love without hurting your wallet.
Toys: Manufacturers get pretty crazy during the Christmas season, flooding the market with tons of toys. After Christmas, toy prices drop dramatically, even up to 90% off their original prices! This is the best to time to pick up gifts for the next year. Having a stuffed animal to snuggle with makes little ones happy any time of year, but getting one at a ridiculously low price makes everyone smile!
Gaming systems: Are your kids (or teens) begging you to buy a new Xbox, Nintendo Switch, or PlayStation 4? With Black Friday and Cyber Monday deals, you may be able to make their wishes come true. Make sure to get up early, because Black Friday sale items disappear quickly.
Candy and chocolate: There’s no doubt that candy makes kids very happy. Candy goes on sale the day after Halloween (November 1st) and the best prices on chocolate pop up right after Valentine’s Day (February 15th). Count on at least half price the next day and every week they go lower until they are gone!
One of the bargain hot spots is your local drug store chain. They are very big into candy and holiday treats so after every holiday you will see the axe fall on prices.
Of course, kids aren’t the only ones to benefit from a steady supply of candy, chocolate, and video games. Adults can also take advantage of these sales and enjoy it, too.
How to Buy Tech and Not Kill Your Wallet
Lovers of modern tech can’t resist the latest gadgets, such as smartphones, tablets, and laptops. But when is the best time to buy?
TVs: Let’s face it, a new TV is one of the most important purchases you can make. One good shopping rule of thumb when it comes to any TV is this: Never buy any TV if it’s not on sale!
Nearly everyone loves to watch movies and TV shows, including families, couples, and college students. If you’re a major sports fan, you need the biggest TV possible to watch games with friends. Fortunately, you have several opportunities to scoop up the TV of your dreams. Black Friday in November and Cyber Week in December and right before the Super Bowl in February are very hot TV sale events.
Tablets, smartphones, and laptops: Black Friday and Cyber Monday provide great opportunities to pick up a new smartphone, laptop, or tablet. You will get huge discounts on older models for sure. Look to grab these gadgets for less and save more than at any other time of the year.
Software: Shopping online for software deals is a great way to save. Black Friday and Cyber Monday aren’t just for buying local. Retailers such as Amazon and Walmart often provide discounts on office software and video game titles online that are not in a retail store.
You’d be correct if you now see that virtually all types of electronics go on sale during the Black Friday weekend. This includes headphones, laptop accessories, wireless game-pads, and smart-TV streaming players. Search online for “stores near me” ahead of time to know exactly what items offer the biggest discounts and where to go first.
Clothing Deals on Fall and Winter Fashions
Great fashion is a top priority for many women and men. To dress the way you want all year long, it makes sense to save money and deals are a big part of that fun.
Winter clothing: Don’t forget to mark your calendar in January and February to go shopping for winter clothes sales. Leather boots and gloves, cardigans, knit sweaters, scarves, coats, and hats all go on sale as spring approaches.
Shoes: Look for discounts on all fall footwear near the end of December. January can be one of the best months to buy running shoes, just in time for any New Year’s resolutions to get rid of extra pounds.
Business suits: If you’re craving a wool suit, set aside some money for January sales. You can save a lot on your favorite fall suits. Although basics are basics, the styles are always slightly changed so that new is always in high demand and last year’s is at bargain pricing.
The day after Christmas is also a good time to shop for fashion items such as dresses and blouses. Go in the early afternoon to search through a good selection of returned gifts.
When to Gear Up for Spring and Summer Sports
Take advantage of cool temperatures to buy the sports equipment your family needs for summer fun, in winter. If you time it right, you can even grab snowboards and winter boots for less.
Sports gear: If your kids are going to be in Little League, buy baseball supplies ahead of time to save. Bats, gloves, cleats, and helmets usually go on sale in January. Winter is one of the best times of the year for sports lovers. If you love hockey, snowboarding, or skiing, wait until the end of February to grab good deals.
Exercise equipment: In January, the Christmas rush is over. Stores know this, and they also know that many Americans want to lose weight after going overboard during Christmas. That’s why the best time to buy exercise equipment is in January. You may save up to 70% on treadmills, exercise bikes, and gym sets.
Bikes: Mountain bikes usually go on sale in late fall and early winter. Take advantage of these months to get awesome models for you and your kids.
Planning Your Purchases
By now you may be saying, “Gary, most of these sales are in the winter, and it’s now July!” That means it is the perfect time to plan your purchases and start saving up. Write down what you need, figure out how many weeks or months until it goes on sale, and divide the estimated purchase price by the number of weeks or months to know how much you need to put away. By the time the sale comes, you’ll be ready to buy.
I have been around “retail” so long that I can actually remember when 4th of July was an extra special event. That was a day when the retail store would have extended early morning hours just to have a huge bathing suit promotion. Macy’s would open the store at 8 a.m. only for the women’s bathing suit department and ladies would line up at the front door for the merchandise at 50% off and more for usage right now!
It goes without saying that you may not have money to buy everything you want right away. Fortunately, sales are an annual deal. Identify the most important things you need to buy, plan ahead, and save up your money to purchase when they’re on sale. After that, plan for next year’s big purchase. Always buy on sale!
Are you ready to plan your savings when you shop to save? What bargains have you seen and purchased over the years and what are you looking for right now?
In Part 1: Identifying the Problem, I shared Lawrence Yeo’s unique take on money and the hamster wheel metaphor, where we just keep spinning and can’t get off. Since then, I have thought more about how best to slow things down by instead attacking each step of the cycle. To be honest, I don’t know if I can properly explain Yeo’s concepts, so I came up with my own version of the hamster wheel. Here it is, rather hastily-drawn:
A common criticism of seeking financial freedom is that it’s all about money. Make more money. Spend less money. However, if you take a step back, money is just part of the flow between how you spend the time in your life. How are you making that money? Why do you want more money? Why are you spending the money?
Accordingly, here various ways that someone could lessen the impact of each part of the cycle.
- Find better-paying work that is equally fulfilling and stimulating. Try to save the excess. Don’t make yourself more unsatisfied for more money.
- Find more fulfilling and stimulating work, even if it pays less. Be happier, and thus need to spend less to replace that happiness.
- Engage in non-work activities that provide meaning and stimulation. If you need a better job, work on a new skill. If you need more stimulation, start a side business and keep your current job. Or just find a new hobby/sport/language. Taking action is the key, as the right activities will energize you.
- Reduce your intake of low-quality media. Stop consuming things that make you feel worse about yourself. The wrong activities will drain you, which encourages more spending.
- Exercise more (try outdoors or with other people) and eat better food. This gives you more energy all day long.
- Spend less money on the things that don’t matter, so you need less money. Cut out the mindless and unhelpful spending.
- Spend more money on the things that truly matter to you. Now that you cut the mindless, you can spend more on improving interpersonal relationships, or energizing activities (see above).
- The more you learn to control this cycle, the more you can use the concept of “Enough” to widen the gap between money in and money out. Decouple earning and spending. Invest in enough productive assets so that your required income is less and less.
Addressing the problem from one angle, helps free you up to attack it from another angle later. For example, if you eat and exercise better, you might have enough energy to take corrective action, and not just fantasize about that side business when you really just turn on the TV after a long day at work.
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Summer is here! And we’re all looking for ways to stay cool, save money on air conditioning, and have some fun while doing it!
If your home has air conditioning, we’ve got a few tips to reduce your summertime energy costs and maybe even increase the life of your AC unit.
For those of you with no air conditioning, don’t fear … I’ve lived without AC for the last 8 years and pride myself on thinking outside the (window unit) box to beat the heat.
And just for fun, I’ve included some unconventional and less common ideas to stay cool this summer without air conditioning.
How to save on air conditioning
Did you know that air conditioners use about 6% of all the energy produced in the United States!!? We pay billions of dollars each year to run our AC units. And this dumps ~120 million metric tons of carbon dioxide into the air each year. Yuk!
Here’s a few tips to use less energy, lower your air conditioning bill, and help reduce your carbon footprint! It’s a true win/win/win!
Adjust the temperature just 1 degree higher. Next time you turn on your air conditioner, set the thermostat just a single degree higher than you usually would. There’s not a huge amount of discomfort in a 1 degree difference, but you’ll notice a 3% reduction in your energy bill!
Get your air conditioning unit serviced. It’s like a car — preventative maintenance will avoid large and expensive repairs and extend the life of your central air conditioning unit, so service is totally worth it. Just simply switching out a dirty and clogged air filter with a new one can reduce your AC’s energy consumption by 5% to 15%! Routine maintenance will keep your central air conditioner in tiptop shape.
In most metro areas, you can find a ton of local handymen who provide air conditioning service on NextDoor, Yelp, or Craigslist. Make sure they are familiar with HVAC system you have, and you could negotiate a good value service rate!
Cover your windows with blinds or curtains to improve your energy efficiency. Glass windows let sunlight into your house and trap the heat inside like a greenhouse. Closing the blinds and covering your windows will stop most outside heat from coming in, so your AC system won’t have to run as hard to keep the house cool.
Seal your doors and windows. Cool air escapes through the tiniest cracks in your door frames and window sills. Usually for less than 10 bucks you can pick up some weather seal strips to control the air flow — keep the cool air in the and hot air out! Could be a fun project to tackle yourself, or you may know a friend who can help you glue on the strips. Easy!
Get a ceiling fan! According to the Department of Energy, a ceiling fan allows you to raise the temperature on your AC about 4 degrees without affecting your comfort level! Ventilation is the most-energy-efficient way to cool your place down, and it’s good for your electricity bill, too.
Keep the lights off, and/or change to LED bulbs. LEDs still produce a tiny bit of heat, but it’s way less than regular incandescent light bulbs. LEDs also have less energy consumption in general, saving a bit more $ for lighting, too! (Residential LEDs — especially Energy Star rated products — use at least 75% less energy and last 25 times longer than incandescent lighting).
Repair or replace your thermostat! It might be a good idea to check if your thermostat is programmed correctly. If it’s off by even a few degrees, your A/C unit may be putting in unnecessary effort without you even knowing it. If you are planning to replace your thermostat, consider getting a programmable thermostat that automatically changes the inside temperature based on time of day and outside temps — a smart thermostat can save up to 10% on A/C energy! (Here’s a good review of the Nest.)
Turn your air conditioner off for a few days! This could be a fun frugal challenge or energy usage competition with an environmentally minded friend. Each day you don’t run the A/C could reduce your monthly bill by 3%. Do this for 1 day a week and you can save almost 15% on your bill. #sweatysundays
And now, just for fun …
Fun tips to stay cool with no air conditioning
For those of you with no A/C, the good news is that your cooling bill is already $0! But this doesn’t solve your sweaty summertime problem. So here are a few funny and unconventional ideas and family activities to try.
*Fair warning: These tactics are extremely uncommon, so follow them at your own risk! Let us know if you use any of them. 🙂
Grow trees to shade your house. On your next trip to the hardware store, nursery, or local park, pick up a handful of acorns or very tiny tree seedlings. Then, plant these in your front and back yard, wait about 20-30 years, and you will have beautiful large oak trees shading your entire house. A genius energy saver!
This tactic requires very long-term thinking. Just like building wealth, it might be the long and boring way, but you’ll be the one laughing later in life when you’re relaxing in the cooled air of your shady jungle property!
Cover your entire house with mirrors. Jump on Craigslist and find a bunch of mirrors in the free section. Then glue them all on the outside of your house, covering the entire exterior. Not only will the mirrors reflect the sun rays to keep heat out, they will give a “disco ball effect” that is perfect for the 80’s party you plan to host in August!
Dig a basement. Not just any basement — keep digging until you get like 4-5 stories down into the earth where you hit the cold air. Make sure there’s no electricity, cellphone coverage, WiFi, or anything living down there. It might be a little scary sitting in a tiny dark hole all day, but at least the temperature will be comfortable. And your cooling costs will be nonexistent!
Make your kids fan you with palm fronds. This could be a punishment or an incentive activity for them. You get to decide! Just make sure to give them regular breaks if their arms get sore. Just send them on a quick trip to the kitchen to bring you another cool beverage – that should be enough time for your human air conditioning system to get a bit of rest.
Cook at your neighbor’s house. Using your own oven and stove can heat up your house even more. So try to cook all your meals using your neighbor’s kitchen instead of yours. Just tell them that your oven is broken and that you’re waiting on a rare replacement part shipping from overseas. This excuse can probably last up to 2 weeks before the neighbor gets fed up with you. Then just switch and pull the same trick with your neighbor on the other side.
Sleep in the nude. I’m probably preaching to the choir with this one … Nobody wants to wear pajamas when it’s 90 degrees at night. Just make sure your blinds are fully closed!
Drill holes in the ceiling to let the hot air out. This tip uses good ol’ fashioned science to cool down your home. We all know hot air rises, so drilling holes for vents through your roof will allow the warm air to escape, cooling your indoor temperature. If it happens to rain, just put large pots and salad bowls all over the house to collect the water. Free cooling AND free rainwater is a win/win that you can brag about at your next extreme frugality meet-up group.
Make friends with people who have pools. Kind of like being a “gold digger,” except you only care about whether the person has a pool. Go down to the nearest mall (also a good place to hang out that has free air conditioning) and make your way over to the pool store. Or if you are at a Walmart or Target, just hang out in the aisle with the pool toys. These are great places to meet new friends! 🙂
In all seriousness, what are your tips to stay cool?
Have a great weekend, everyone! Happy Fourth of July!!
Pic up top by Andrew Seaman
I’ve talked several times about how your career is your most important financial asset.
Given this, you want to treat your career like other major assets. You want to grow it, of course. But just as important is protecting it. That’s why I wrote Career Insurance: Protecting Your Most Valuable Asset.
One of the best ways to protect your career, but also one of the hardest and least known, was covered in a post I first wrote for Financial Samurai several years ago. It focused on employment contracts.
Most people are familiar with contracts for professional athletes — where the athletes agree to play for a given team for a given time at a given wage. Few people realize that there are similar contracts for top business executives. There are a few differences as I’ll detail below, but essentially do the same thing — they lock in a key employee in exchange for a guaranteed payday.
Now let’s get to the post I wrote, which I have updated a bit for the ESI Money audience…
As most Financial Samurai readers know, Sam is the expert on engineering your layoff.
His methods have helped hundreds negotiate great packages as they leave their employers. Obviously this is a tried and true method for maximizing your exit from a company.
But it’s not the only way. Today I’ll be telling you how you can negotiate your severance before you even take a job.
This post will detail the ins and outs of employment contracts (sometimes referred to as employee agreements). I prefer the former since that’s what every executive I’ve ever worked with called them.
Employment contracts are negotiated between an employer and employee prior to the employee joining the company. The contracts grant rights and privileges to each party as well as imposes requirements on both.
I am not a lawyer but I play one on the internet. Seriously, this is not meant as legal advice but rather a guideline to help you learn about employment contracts and potentially make use of them. I’m hoping some lawyers with personnel contract experience join us in the comments to fill in any blanks I miss.
That said, I was a business executive who dealt with employment contracts for two decades, had employment contracts with four separate companies over almost 20 years, and had payouts on two of those agreements.
Key Parts of an Employment Contract
As with any legal document, employment contracts can take many forms. But here are some of the most common requirements an employee may agree to in an employment contract:
- Keep company trade secrets confidential while employed by the company and within some period after leaving.
- Not solicit fellow employees or former clients from the company for a given period of time after leaving the company.
- Act in the best interest of the company and not make business agreements that could cause harm.
- Not use company contacts, resources, and relationships for personal gain outside of work (such as divert work from the company to a personally owned business).
- That any work done on company time and with company resources belongs to the employer. There may even be a clause stating that whatever ideas you have while employed with the company belong to the company if the ideas are within their line of business.
- Shall devote full business energies, interest, abilities and productive time to the company (will not accept other employment, consulting work or render other services to any person, business or organization).
- Agree not to acquire, assume or participate in, directly or indirectly, any position, investment or interest that employee knows is adverse or antagonistic to the company, its business, clients, strategic partners, investors or prospects.
- Agree to termination for cause (if employee materially breaches this contract, disobeys a reasonable directive of the company, or violates any written company policy that is determined to be materially contrary to the best interests of the company; engages in any knowing or intentional act or omission that is materially contrary to the best interests of the company; fails to restrict use of, or abuses, drugs or alcohol, including impairment of ability to function at work; commits any fraud, embezzlement or other act of dishonesty against the company; commits a criminal act, or is convicted of, or pleads no contest to, a felony.)
Here are some common provisions an employer may agree to:
- Amount of compensation the employee gets if terminated.
- Detail the employee’s annual salary, bonus criteria, and annual raises.
- Explain employee benefits and vacation.
- List employee title and reporting structure (especially title of person employee will report to).
- Specifics of employee relocation package.
- Allow the employee to purchase stocks or securities in given amounts at given rates.
- List what happens if employee dies, is disabled, or voluntarily resigns.
In addition to the above, there are often sections pertaining to the overall agreement such as:
- Provisions regarding how disputes should be legally resolved (i.e., arbitration).
- Lists what state laws will be used to decide differences.
- Catch-all legal mumbo-jumbo that covers other (usually minor) parts of the contract.
Can I Have that in English?
The previous section may read to you like a foreign language. Believe me, the bullet points are actually pretty readable when compared to reviewing the actual contract.
To boil things down to the vital elements, here’s the essence of an employment contract:
- The employer agrees to hire the employee and spells out his/her compensation.
- The employee agrees to work for employer and work in its best interests.
- If the employee is terminated for cause (doing something illegal, immoral, or hurting the company), then he can be released without any additional compensation.
- If the employee is terminated for any other reason, there’s an agreed upon payout and method of payout.
- If the employee leaves of his own free will, he gets nothing extra.
If it’s not obvious, the pros and cons for the employee boil down to these:
- Pros — Knows that he has a certain amount of income guaranteed even if he’s fired.
- Cons — Employee has to agree to some conditions, though these are ones most would likely fulfill anyway.
In other words, it’s a pretty sweet deal for the employee. You can see why most executives want an employment contract.
How It Works in Practicality
Generally at some time in the recruiting process, the subject of an employment contract is brought up, usually by the employee. Employers are loathe to sign such an agreement as it requires them to pay an employee if there’s a falling out.
Employees want a contract, of course, because it guarantees them a payout if the relationship goes south.
So the topic is brought up and the negotiation is started. Is there an agreement? What are the key provisions? Who does what? And so forth. Until there’s some sort of resolution.
How to Get an Employment Contract
Here’s the bad news: employment contracts are difficult to get, especially in a slack labor market.
As I noted above, employers don’t like to give them because they basically take on financial liabilities (which no company likes to do) without a lot of compensation in return.
So why do employers give them and who gets them?
Employers give contracts to key employees in order for them to 1) accept a job initially and 2) remain in a job (with a sense of security) as long as useful.
In short, the employee has to be valuable enough that the benefit of having the employee is greater than the liability of the agreement.
As such, they are generally given at the executive level to managers who have the ability to deliver substantial business results. That said, any level of employee, as long as they are important to the company, can get one. The key is: you have some skill or ability that brings great value to the company.
Many of these principles can be illustrated through my personal experience.
In 1999 I joined a new company as a vice president.
It was standard for them to have employment contracts with all executives.
The standard agreement at the company basically entitled me to one year’s salary if I was let go for almost any reason. The exceptions were so unlikely to happen (get convicted of a felony, act immorally in a way that hurt the company, etc.) that there was virtually zero chance of me not getting a payout if fired. I was thrilled.
Five years down the road I was ready for a change and preparing to be hired by a new company as an executive vice president. This organization was much smaller, but about as profitable as my current company. The new, small company had no one with an employment contract — they didn’t even know what one was (or said they didn’t).
I provided them with a copy of my current agreement and told them I needed one before I would come aboard. They consulted their lawyer and basically copied the one I had at the old firm. The only change was they reduced the one year payout to six months. This was agreeable to me given my new compensation was much better and I joined the firm.
I worked for that company for nine years when another company wanted to hire me as their president, a significant move for me. Again when I brought up the subject of the employment contract the Owner/CEO claimed he’d never heard of one. I provided my copy and they eventually copied it. I joined the firm.
The first full year I was with them, we had a record sales year. The fourth month into year two the CEO left to run another business, they brought in a new CEO who didn’t want a president, and they fired me. Or in kinder terms they “exercised my contract”. I was paid to go away. You can read all the sordid details in The Day My Most Valuable Asset Took a Hit.
At that point I contemplated early retirement, but Sam had not yet convinced me of its benefits. I interviewed with a new firm and was hired within three months of being fired. They too claimed they had never heard of an employment contract. I gave them a copy of my most recent one and we began to negotiate back and forth. Two significant provisions changed:
- There was a sliding scale based on when I was let go of what I would receive (if fired within the first year I got one year’s salary, if fired within years 2-5 I got six month’s salary, and so forth)
- There was a provision added that detailed how the employer could get rid of me if I didn’t perform the way they wanted.
I was fine with option #1 but pushed back on #2. The purpose of an employment contract is to pay the employee a set amount if he is let go for ANY reason other than criminal activity or significantly hurting the company. They wanted to add a performance element, something that is usually not in an employment contract because it is highly subjective and can be manipulated by the employer. I had been around the block a few times and knew that employers can trump up almost anything to be a performance issue if they want, so I didn’t want the provision.
But they held fast and gave me a take-it-or-leave-it ultimatum. In the end I took it since even if they enacted the performance clause I would still received five months’ worth of guaranteed salary which wasn’t that different than the six months I had.
Plus, by this time, I was financially independent and the move got me to Colorado, so I felt I was adequately prepared and compensated.
Well, as you might know, things did not go well. They created nonsensical issues and gave me unattainable objectives to hit within a 40-day grace period (the first part of my severance time). I knew I wouldn’t hit them, didn’t even try since they were unachievable, and 40 days later they exercised part two of my contract and paid me to get lost. This is when I decided it was time to retire and that’s what I did.
Tips for Making the Most of an Employment Contract
Now that we all have a common understanding of how employment contracts work, here are a few tips for you to consider as you work to negotiate your severance before you’re hired:
- As you grow in skill and experience, try to get a contract (it’s generally easier when you switch companies). If your work/skill is valuable enough you can do it. Even if it’s basic and doesn’t guarantee much, get one as it can be used as a foundation to build upon at your next move.
- Make the amount/length of time which the employer has to pay you if terminated as high/long as possible. As a general guideline, six months is great and a year is phenomenal. Three months is probably more likely and more acceptable to most employers.
- Try to avoid a declining scale that ends at zero. If the scale starts at a year’s salary and ends at six months, that’s fine, but don’t accept something that works down to a minimal amount, especially if it’s zero. The only way I’d do that would be if it was my first agreement. At that point it’s better to have something than nothing if that’s all the employer will agree to.
- Ensure the amount renews daily and not be for a fixed period. This is similar to the previous comment. You want your six-month (or whatever) agreement to pay for six months, so it will renew daily. You don’t want an agreement that starts with six months when you begin the job, then counts down day by day until it hits zero six months later.
- Once you have an agreement, take it to the next employer. Try to get terms at least as good as you had but improve if you can. I wasn’t successful at this as I started so high that the only way was down, but most will begin lower and work their way up. You may go down but perhaps you can leverage a lower contract for something you prefer like higher compensation.
- Use a lawyer if you’re not versed in dealing with contracts. I handled my own agreements as I have business contract experience, but most people need advice. If there’s any question, at least have a lawyer give it a once-over. You do not want to end up with a contract you think covers you and does not. And believe me, they can be difficult to read for someone not used to them.
- Reduce your job-related emergency fund. If you want six months’ salary in your “get fired” emergency fund, a six-month contract covers it. This allows you to take money that could be in savings and invest it. You’ll still need some emergency cash to cover other unexpected expenses.
- Don’t quit because you hate the job/company/people. Even if it gets bad, try to stick it out. You can always ask them to “exercise your contract” or even reach a compromise if you really dislike your situation (for instance, you may have a six-month guarantee but would be willing to leave if they paid you for three months). In the end you get nothing if you leave voluntarily so don’t do it unless you have a great opportunity you’re moving on to.
- Try to eliminate performance-based clauses. These tend to favor the employer and give them plenty of latitude to let you go and pay less (or nothing!) than they might otherwise be required to.
- You can ask for more than money. Everything’s negotiable, so if it’s in the contract (or you want it in), be sure it’s included. Perhaps you want more vacation, a car allowance, or added benefits only for a select few. Get these in the agreement to ensure they are given (I had one friend who was promised stock options verbally and then didn’t get them. If they had been in his contract, the company would have been required to pay them).
- Don’t agree to any extra commitments if they fire you. One employer tried to get me to agree to a whole host of extra provisions in order to get my severance check. I told them they had two choices: 1) pay me with no extra commitments on my part or 2) offer me extra compensation to consider the extra provisions. They paid me. My contract did not stipulate that I needed to agree to anything extra to get a payout so I wasn’t going to do so.
In closing let me encourage you that the time to think about getting an employment contract is the same time you’re considering taking a new position. Take the steps upfront to ensure your severance is set before you even set foot at the company.
The post How to Protect Your Career Earnings with an Employment Contract appeared first on ESI Money.
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