Category Archives: Insurance Definition
Simplicity as a Life-style: 10 Practical Steps
Simplicity as a Life-style: 10 Practical Steps
There is a relatively new phenomenon in North America called ‘voluntary simplicity.’ The term ‘voluntary simplicity’ is used to describe a process whereby people opt out of the harried life of modern day living, and chose to live a life of frugality. Frugality in this sense doesn’t mean poverty rather, it means, enjoying the virtue of getting good value for every minute of your life energy and from everything you have the use of. Frugal is characterised by or reflective of economy in the expenditure of resources.
Simplicity means making time for yourself in a hectic world. You clear out what is superfluous and make room for a life of passion, depth, and joy. As people become more and more stressed out from the pace of modern life and as we become increasingly concerned about the price of our over-consumption of the planet’s resources, the movement to living in a state of ‘mindfulness’ has increasing interest as a chosen life-style. To be mindful means to dwell deeply in the present moment knowing there is only one opportunity and it will never come again.
Voluntary simplicity comes from within. It is a social movement of a more sustainable, gratifying, and spiritually connected existence. Voluntary simplicity is a matter of personal responsibility and conscious awareness of how we live on the planet. It means identifying the difference between our needs and our wants. Needs are those things that are necessary for our survival – food, clothing, and shelter. Wants are all the other things we desire and to a large extent are driven by media advertising. Simplicity as a life-style is the identifiable difference between needs and wants, and the awareness of the cost in terms of our life force energy and our willingness to pay the price.
Pursuing a Life of Simplicity
The Chinese pictograph for ‘busy’ is composed of two characters: heart and killing. When I first read this, I thought of the many people who are ‘too busy’ to make that phone call to someone they love and then one day it is too late; the many children who get gifts and/or money instead of their parents’ time and then one day they leave home and it is too late; the many times we have an opportunity to touch someone’s life with kindness but we are ‘too busy’ and the moment never comes again and it is too late.
As we search for meaning in our lives, we start to become aware of the emptiness and shallowness of a life based on materialism and consumerism. We become aware of the tremendous expenditure of our ‘life force energy’ to just keep up with the daily ‘rat race.’ We start the search for a life of deeper meaning and ask ourselves ‘what gives us joy?’ We realise we don’t know and can’t answer the question but we feel a yearning in our hearts for a sense of connection, a sense of purpose, and the sense that our life matters. The question demands an answer. We discover that all the myths such as: get a job, get married, have children, buy a mortgage with a two-car garage, and you will be happy, makes us wonder what is the matter with us when we feel the increasing futility of it all. The emphasis on externally meeting our needs leaves a ‘hole in our soul’ as we consume more and more and feel less and less satisfied. Consume by definition means to do away with completely; destroy – to spend wastefully; and squander – use up. Is consumed by our meaningless and frenzied consumerism a description that all too closely resembles most our lives?
What we don’t realise is that we are spiritual beings, in a physical body, having a human experience, and when we don’t connect the internal (spiritual) and the external (physical), our lives increasingly lose a sense of balance or harmony. There is literally no distinction between the outer and the inner when our lives are in balance, and as we seek this stability, where do we start? We start by examining our expectations and assumptions including the belief systems that drive us to live our lives ‘zombie-like’ without determining whether or not we want to play this game. We move towards consciously asking the questions about how much of our ‘life force energy’ we are prepared to exchange for the material goods we consume. This expenditure of ‘life force energy’ includes the storing, cleaning, insurance costs, maintaining, etc. all the stuff that clutters our lives.
Practical Steps to Simplifying Your Life
1. Reuse paper bags, envelopes, newspapers, etc. Newspapers and shredded paper make excellent mulch in the garden. The mulch will break down over a period of time and add humus to the soil. (Don’t use coloured flyers.)
2. Have a Buy Nothing Day.
3. Carve some space for ‘mindful living’ so that you have time for ‘beingness’ rather than ‘doingness.’
4. Find friends who know the glass is half-full or in other words, find friends who share the same value system as you do.
5. Grow your own food or buy as much as possible from local growers.
6. Use non-toxic products such as borax, vinegar, baking soda, lemon, and salt in your home, yard, and garden.
7. Before you buy something, write the item down on a note and if you still want it after a month, purchase it then.
8. Decide what is really working in your life and let go of that which no longer serves you.
9. Surround yourself with what you really need and love.
10. Go Organic. Organic gardening is not only about the avoidance of chemicals, but in the
larger picture, it is organic living using Nature’s laws.
A Wake-up Call For Educators Of At-risk Youth
A Wake-up Call For Educators Of At-risk Youth
Universal Greetings with Respect,
It would be a travesty of justice to approach the subject of At-Risk Youth without addressing how people of color are affected since the largest number of At-Risk Youth are of color. Three primary areas of concern are:
1.Our higher rate of incarceration, from juvenile to state penitentiaries, compared to our white counterparts.
2.Our limited access to affordable and quality health care.
3.The lack of appropriate pay for qualified teachers to work in economically deprived areas with our at-risk youth–the “shadow kids.”
I am aware that it is impossible for a single person to speak to all of the opinions, experiences and ideologies of a race of people however, is my desire to express as much as I am able based upon my exposure.
As a Black man living in America it is obvious that I (We) are attending way too many funerals of our youth. Yet there is a greater number of youth who are physically alive according to medical sources, but to those of us who know them, we know that they are dying–spiritually, intellectually and emotionally due to the infestation of negativity and mis-education. We have some of the most physically overweight and unhealthy people in some of the most economically deprived communities (“When you control a man’s thinking you don’t have to control his actions.”–Carter Woodson) and those numbers are growing exponentially.
As a member of the group known as African Americans, we are a very resilient people with unlimited potential who possess a rich culture. We exist on the shoulders of giants such as Shaka Zulu, Marcus Garvey, Harriet Tubman, Fannie Lou Hamer, Martin Luther King Jr., El Hajj Malik Shabazz and multitudes more whose names we don’t know and whose history we have not studied, excluding minimal discussions which are condoned during the so-called Black History month.
However, in spite of all things considered, many fighters for our at-risk youth become co-opted and silenced by the need to keep insurance, pay mortgages, car notes, win friends and influence people. It is not popular to be race-specific in our empowerment and teaching methods, although the disproportion in our detention centers, alternative schools and among at-risk youth is, race-specific. In attempts to be politically correct, all inclusive and non-offensive, we have watered downed, generalized and broad-brushed our approach to where the core of the message, if still present at all, is having little effect.
We have developed individual wealth and collective poverty. We have spread throughout the Diaspora and become disconnected in our own homes. In communities of color, the definition of success has been too often defined by material possessions over quality of life; excessive alcohol consumption under the illusion of living the good life; a pervasion of music in our community that denigrates our women and causes our sense of brotherhood among males to be degenerated into a hatred of self and kind. Then we, as adults, award and reward the musical artist with top ratings, air play, movie deals and unsupervised time with our children, in the name of freedom. The results of this mentality are displayed in the local newspapers, evening news and our local funeral homes.
The good news is although this is not an easy task we, as individuals and as a nation, have overcome monumental challenges in our past and present when our cause was more critical than the consequences that we would face. The result is that many one time at-risk youth have turned out successful in spite of all the challenges.
We must work to close the generational divide. Effective education must include the parents or whoever are their caregivers. What harvester would complain of the fruit without ever giving attention to the tree? Also we don’t have to be a part of an organization to get started moving towards adjusting the mindset (even though that helps). We can begin in our homes, in our classrooms, and within our own circle of influence. We need a paradigm shift. Of course this has to first begin with us.
All we need are three things:
1)A sincere desire to change the current situation. (Of course you have to realize that whatever effects one of us directly affects us all indirectly.)
2)The willingness to make a plan and follow it. (This cannot be a quick fix, microwave or sprint-like approach. This is a slow-cooker, a marathon, a lifetime change.) And,
3)The willingness to put in the required work. (It ain’t over till it’s over!)
“The Way of R.E.S.P.E.C.T.” encourages and promotes an approach of:
•Remembering your ancestors, to close the gap between generations.
•Elevating your understanding of yourself, your students and the challenges that both face.
•Staying Strong and Staying Ready–physically, spiritually, emotionally and intellectually.
•Pursuing your dreams with passion (finding what matters not just what works).
•Encouraging each other; creating a support system.
•Creating opportunities for success instead of waiting for opportunities to knock at the door.
•Then teaching others what you know. It becomes stronger the more you share it.
For my brothers and sisters of color and all those who work with children and families of color, I share this quote from Marcus Garvey: “Others have had the advantage of organization for centuries, so what seems to them unnecessary, from a racial point of view, becomes necessary to us, who have had to labor all along under the disadvantage of being scattered without a racial aim or purpose.”
“Until lions tell their tale, the story of the hunt will always glorify the hunter.”
African Proverb
Respect,
Marcus “Dr. Respect” Gentry
The First Line of Defense: Knowing the Facts About Home Security
The First Line of Defense: Knowing the Facts About Home Security
Sometimes the simplest steps are the smartest! By placing a sign that advertises your home security system in your yard, you can dramatically reduce your chances of being targeted by thieves.
In a study published in the Journal of Economic and Social Measurement, Dr. Yochanan Shachmurove, Dr. Gideon Fishman and Dr. Simon Hakim studied the motivating factors behind a burglar’s decision to rob one home over another. Their findings indicated that isolation and occupancy were the two major considerations.
The study indicated that while you are reclining in your lazy chair and flipping through 100 channels of Cable TV (and still finding nothing to watch) you can rest easy. Ok, the study did not read quite that way – but it does tell us that burglars rarely target homes with occupants in residence.
Homes that are more frequently targeted tend to be secluded or isolated. Keep in mind that this definition encompasses homes with an entrance that is not visible from the street, due to foliage or other visual obstructions. The ideal ‘pigeon’ for a thief is an expensive home that is detached with no security measures and is located less than a mile from a major highway or road.
The study also revealed that the third most important factor is highly visible security measures. Deadbolt locks can’t be seen so they did not deter burglars. However, advertising the fact that your home is protected by a security system was a major deterrent. The professors found that if a house is protected by an alarm system, the chances of a burglar’s choosing it are virtually zero. Those are pretty great odds!
In the study’s conclusion, the professors determined that homes without security systems were 3.5 times more likely to be burglarized than those with protection. If a thief does victimize a home with a security system, they spend far less time in the house during the robbery and therefore remove fewer pieces of property.
This research and similar studies have led insurance companies, such as State Farm, to advise their clients to install home security systems. In fact, many times homeowners with alarm systems will receive an incentive in premiums. The National Crime Prevention Council in Washington, D.C. has also endorsed security systems as a deterrent to crime.
A home security system can range in cost from less than fifty dollars to upwards of tens of thousands of dollars. Sometimes you can actually get a system for free, when you sign a contract with a monitoring company. You can also opt for a wireless system, which is quite easy to install. In fact, these systems typically fall under the “do it yourself” category. But before you decide to tackle that particular project, you need to be armed with a working knowledge of all your security system options. No pun intended!
First, there are two basic types of systems. One option sounds an alarm and turns on various lights throughout the home. The other offers those features, but is also connected to a monitoring company twenty-four hours a day. With this system, an employee at the monitoring company automatically calls the police for you, when the alarm is tripped. These systems not only protect against intruders, but can also be hooked up to fire alarms and carbon monoxide protectors.
You may also want to consider a system that provides you with the option to place “panic buttons” throughout your home. These are particularly valuable, for those with a medically fragile family member.
The most expensive systems have surveillance cameras placed at checkpoints throughout your property. You can actually monitor your home yourself from any location, by connecting to a closed circuit program on your laptop.
Detectors can be found not only on doors and windows, but also underneath rugs and in every room in the house. When a detector is tripped, the homeowner checks his control panel to see exactly where the disturbance is occurring.
If there is no danger, the homeowner can opt to cancel the phone call to the monitoring company, or shut down the alarm by entering a pass code on the control center. To avoid sending false alarms, family members should be taught how to use the password system. If the system is not halted, the monitoring company phones the police and they are dispatched to your home.
Now how do you translate all this information into practical applications, when it comes to actually keeping your home from being burglarized? Let’s summarize:
– Put a sign up in your front yard advertising your system. Decals on the windows are not as effective.
– Buy a system that sounds an alarm.
– Invest in a system that provides protection against fire and carbon monoxide. One smoke detector in your kitchen is not as effective as a series of smoke and heat detectors placed strategically throughout your home. If your house catches fire when you are not at home, your monitoring company alerts the police immediately.
– Monitoring companies are very valuable in emergencies, but you will also need to educate family members and household guests to maximize the benefits of your system.
– If your house is secluded or in the country, your best defense is a system connected to a monitoring company. A sounding alarm may not offer enough protection.
– Burglars may cut the outside telephone wires before they enter a house. If you don’t have a cell phone, you won’t be able to call the police and your system won’t be able to call the monitoring company. So consider adding a second phone line.
– Cut any foliage hiding doors and windows. Burglars deliberately pick houses that they can enter without detection from the street.
– Join a Neighborhood Watch group or start one yourself.
Points & Closing Costs
Points & Closing Costs
Should you pay points? What are points? Is that money going directly into the Loan Officer’s pocket? Well, that depends. This article will look at these questions as well as a few others to see which strategy makes the most sense in the long run. We’ll also look at the math to calculate when points make sense and when they don’t.
Let’s start with the definition. A point is 1% of the loan balance. So if you’re getting a 0K loan, one point is 00. The ‘standard closing cost structure’ will include one point. In fact, the first point is referred to as ‘origination’. The origination is the fee to ‘originate’ the loan. So that first 1% goes directly to the Broker. And depending on your Loan Officer’s volume, he or she will get some percentage of that money.
The remaining portion pays for the lights, the office space, the furniture, photocopier and so on. Part of that money goes to the Loan Officer and the rest pays for the office. That explains the origination. Anything beyond that is referred to as ‘points’ and points are actually prepaid interest; money that goes directly to the Lender. And in exchange for that prepaid interest, the Lender offers a lower interest rate, lowering your payment. We can calculate the breakeven for the decision. You either pay more up front and get a lower payment or you pay less up front and get a higher payment.
Before we look at the math, we have to address a couple of issues. For starters, the points and origination are tax deductible so they don’t cost you as much as it may appear at first blush. If you’re getting a 0K loan (1 point is 00) and depending on your tax rate, that point may only cost you 00 or 00 on an after-tax basis. You’re either paying that money to the government or you’re using it to buy down your interest rate. When calculating the breakeven, always use the after-tax cost.
Secondly, one point buys different amounts depending on what loan you’re getting. If you’re getting a 30-year fixed mortgage, one point will reduce your interest rate by about 0.25%. With loans that are fixed for 5 or 7 years, one point will reduce your rate by about 0.375%. These are not exact figures. They vary by lender and by program. If you’re getting a 2-year fixed loan, one point would reduce your rate by a full 0.50%. The shorter the fixed period, the more one point will buy.
What’s the breakeven for buying the interest rate down? Well, for a 30-year fixed mortgage, the breakeven is usually between 3 and 4 years. In other words, if you sold the property or refinanced the mortgage within 3 or 4 years, you would’ve paid more money buying the rate down. The lower interest rate results in a lower monthly payment but it would take between 36 and 48 months to get the initial investment back. If you kept the house for longer than 3 or 4 years without refinancing, you would’ve recaptured the entire initial investment and be saving money each month for as long as you keep the mortgage.
For a 5/1 ARM or a 7/1 ARM, the breakeven is about 18 months to 2 years. That’s a much shorter period of time because one point buys more in these loan programs. For a 2-year fixed, the breakeven is usually just 14 or 15 months. So if you kept the mortgage for the first two years, you would’ve already saved money by buying the rate down at the beginning. Mathematically speaking, most people are better off buying the rate down.
The problem is that ‘points’ don’t sound very good. It sounds like you’re getting ripped off. Brokers know this so they generally don’t tell you the reality because they’re worried it’ll make their quote appear less competitive. But the reality is that they can help you save a bunch of money if you don’t refinance every year or two. And with lower interest rates behind us, the refinance boom is definitely over and people who refinance now should plan to keep their mortgages for as long as possible. Remember, it doesn’t matter what anybody tells you, refinancing costs money and you should try to do so as little as possible.
The industry has gone beyond avoiding ‘points’. They’re actually avoiding the origination as well. Again, the origination is the first 1% and most people mistakenly refer to it as a point, even though it’s technically different. Anyway, the industry’s been marketing ‘zero point’ loans for a few years already and most people jump at it, thinking they’re saving money. Well, the same math is true for the first 1% as for the second or even the third. If you’re not paying the 1% origination as a closing cost, rest assured, it’s hidden in a higher interest rate. Nobody’s doing loans for free out there and most banks have a minimum 1% origination anyway so you’re paying for it one way or another.
The reason this works is because Lenders pay Loan Officers rebates for loans with rates higher than the current market rate. Assume certain circumstances regarding credit, income and assets yields a market rate of 6.5% and the Loan Officer sells the loan with a rate of 7%, the Lender will pay the Loan Officer a rebate on that loan. If the closing costs do not include the origination, the Loan Officer just needs to raise the interest rate high enough to get a rebate of at least a 1%. And if they want to make more than 1%, they only need to raise the rate a bit more.
This goes even a step further when Loan Officers market ‘no cost loans’. Again, refinancing costs money and the fees associated with a purchase or refinance get paid one way or another so if they’re not itemized in the closing costs, they’re hidden in a higher interest rate. In today’s lending environment, you can mark up a loan so high that you get 2 or even 3% rebate after the loan closes. Don’t get fooled by ‘no cost loans’. It’s just a marketing gimmick.
There are four main categories of closing costs. First, you get the origination and any points you pay to buy the rate down. The second is the lender fees including underwriting and processing. Third, you get all the third-party fees like the credit report, appraisal, flood certification, notary and tax service. The forth category includes the escrow and title fees such as recording, settlement, courier and title insurance. For purchase transactions, there’s one more category for transfer taxes. In California, transfer taxes range from .10 per 00 to almost per 00 in some municipalities.
For origination and points, you can calculate it yourself. The origination will be 1% of the loan balance. If you have a first and second mortgage, it will be 1% of the combined mortgages. If you’ve decided to buy the rate down with extra points, just add an additional 1% for each point you’ve decided to buy. If you’ve got two loans, the points probably only apply to the first mortgage. You could buy the rate down on the second mortgage as well but it’s less common.
The second category is lenders fees. These fees vary widely. Some lenders have underwriting fees as low as 0. Others are as high as 00 or even higher. Also, if you have a second mortgage, there may be a second underwriting fee and I’ve seen those as high as 0. Another fee you’ll see is processing. That’s another lender fee and I’ve seen those range from about 0 to 00.
Here’s my opinion on lender fees. If they’re charging a lot for underwriting, they’re probably using that revenue to help subsidize competitive rates. It’s just a different strategy. It’s not like some lenders are making huge profits while others are making nothing. The lending community has become extremely competitive and individual companies will try to get their revenue from different places. At the end of the day, these fees will be fully disclosed through the APR and that’s always the best way to determine the competitiveness of your quote.
As for processing, anything over 0 is a rip-off. All Loan Officers have processors. They’re real people who process real loans and chase all the conditions required by the Lender. It’s a tedious job and these people have to get paid somehow. I’ve got no problem with a processing fee as high as 0. Personally, I charge 5 for processing. But a processing fee of 00 is a complete rip-off and I would push back hard on anyone trying to charge me that much.
Third party fees are next. In California, you can expect to pay from 0 to 0 for your appraisal depending on what format the lender requires. You can expect or for your credit report, to for tax service, to for your flood certification and to 0 for your notary. Why such a big variance for notary? Because you can have a mobile notary come to your home for the signing. That’s a lot more convenient but it’ll cost you, usually 0 for a single mortgage and 0 for a first and second combo. I should know. I had a signing service before I started originating loans. If you sign at the Title Company, the notary fee is usually .
The forth category includes your escrow and title charges. Escrow fees will range from 0 and 0, depending on the size of the transaction. Expect between 0 and 0 for recording and to 0 for courier services, depending on how many times the documents have to be couriered around. Title insurance is frequently the second largest fee on the closing statement, next to the origination. Title insurance can run you anywhere from 0 all the way to 00 or more, depending on the value of the property.
All of these fees constitute what’s called ‘non-recurring’ closing costs. That means they’re all one-time fees. There’s another category of fees called prepaid items or ‘recurring’ closing costs. These are bills you would’ve had to pay at some point anyway. But because of the transaction, some of those bills are collected ahead of time. These generally include prepaid interest, property taxes, hazard insurance and, in some cases, HOA dues.
A major distinction with prepaid items is whether or not you have an impound account. An impound account allows your property taxes and hazard insurance to be collected at the same time as your mortgage payment. The obvious advantage is that you don’t have any surprise bills during the year and your monthly housing payment includes everything. But the downside is that you have to put some money aside in a reserve account at the time the transaction closes. That means you have to bring more money in at closing, giving the illusion of higher closing costs. In fact, it’s your own money and you’ll eventually get it back but it’s worth discussing with your Loan Officer before you get to the signing.
Overall, if you decide not to have an impound account, you can bank on closing costs and prepaid items between 2% and 2.5%. If you decide to include an impound account, you can expect between 2.5% and 3% in total closing costs and prepaid items. These are generalizations to be sure but they give you a fairly good idea of what to expect.
Is The 50-Year Mortgage For You?
Is The 50-Year Mortgage For You?
During the past few weeks several mortgage lenders have announced that they will now offer 50-year mortgages. This is a curious idea, but not as curious as it could be: At the height of the real estate boom in Japan some homes were financed with 100-year mortgages.
The 30-year mortgage that is now the gold standard of American home finance was once virtually unknown. In the early part of the 20th century most mortgages in the U.S. were “term” loans, mortgages that lasted just five years. Since most of the debt could not be repaid in five years, at the end of the term owners would go out and get replacement five-year mortgages.
This system worked fairly well until the 1930s. Then the Depression drove down employment levels and shredded property values. In the west, the Dust Bowl impacted many states.
But then a new idea arose. The just-formed Federal Housing Administration (FHA) said it would guarantee the repayment of 20-year loans if borrowers would pay insurance fees. Private lenders followed with their own longer-term mortgages and the result was that term loans largely disappeared from the U.S. marketplace.
Over time the accepted definition of “long-term” financing changed from 20 years to 25 years and then to 30 years. Forty-year mortgages have been available since at least the 1980s.
What’s the attraction of long-term loans?
Fixed-rate, long-term financing represents stability. If times are tough you don’t have to worry about qualifying for a new loan. And if rates are fixed, then rising interest levels are not a concern.
But longer-term loans also have another value: They may allow borrowers to qualify for more financing.
Suppose we want to borrow 0,000 at 6.5 percent interest. With fixed-rate financing, the monthly costs for principal and interest would be as follows:
Monthly Mortgage Payments: Principal & Interest
15-years: ,613.32
20-years: ,236.72
25-years: ,025.62
30-years: ,896.20
40-years: ,756.37
50-years: ,691.15
The list above plainly shows that the longer the term, the lower the monthly cost for principal and interest. The practical advantage of longer monthly payments is that borrowers can obtain larger loans. Compared with 15-year financing, using a 50-year loan would reduce cash costs by more than 0 a month in our example.
Monthly payments are not the only consideration, however. Borrowers should also look at potential loan costs. Because longer-term loans are, well, longer, money is outstanding for a greater period of time than with 30-year financing. The result is that potential interest costs increase substantially with time.
Total Potential Interest:
15-years: 0,397.98
20-years: 6,812.66
25-years: 7,686.45
30-years: 2,633.47
40-years: 3,057.81
50-years: 4,690.40
The huge interest-costs over 50 years surely seem formidable, but is that really the case?
There are several issues to consider.
If you can buy an appreciating property then a long-term loan may be advantageous when compared to the alternative: No financing. If you cannot qualify for other loan products because the monthly cost is too high or for other reasons, then 40- and 50-year financing may be attractive.
If you get a fixed-rate mortgage you have protection against rising interest costs. In effect, a hedge.
If you expect your income to rise in the future, a longer-term loan may allow you to buy now instead of waiting until you have a larger paycheck — or waiting until prices are higher.
If you have a fixed-rate mortgage and have the right to prepay, in whole or in part, at any time and without penalty, then you have two attractive options: First, as your income grows you can make monthly prepayments that reduce the loan term and cut potential interest costs. Second, if rates decline you can refinance — an attractive choice given that loans today can often be refinanced without the need for much (or sometimes any) cash at closing. (That’s not to say there is no cost to close, but that you can finance closing costs and thus avoid the need to come up with cash.)
This is the biggie: The potential cost over 50 years is not a worry if you only have the loan for five years, 10 years or whatever.
Would I get a longer-term mortgage? Actually, I have.
Long ago I bought an investment property with a 40-year loan. Since then rental rates have increased and the property has long thrown off a positive cashflow each month. No less important, the value of the property has increased some 400 percent — value I would not have if the property could not have been purchased.
So the next time someone mentions a longer-term loan, don’t laugh. Check rates, terms and conditions; it may well be that a long-term loan is what you need to get the property you want with the income you have now.
The 5 W’s of World Class Customer Service Training
The 5 W’s of World Class Customer Service Training
The preamble to the United States Constitution begins, ‘we, the people.’ I feel strongly that we, the people, are what make the difference in life, both personally and professionally.
The interaction anyone has at any level with your employees, including you, gives a customer– whether current, potential, internal or external–an opportunity to make a judgment about you, your company, all companies like yours. I’m not just talking about call centers here. All technical support or help desk personnel are included as well. As a matter of fact, anyone who is in the customer service business period.
With continued focus on customer satisfaction, customer retention, and lifetime value of the customer, it is no surprise that contact center operations continue to increase in importance as the primary hub of a customer’s experience. For the customer, the person on the other end of the phone is the company. The contact center is still the most common way that customers get in touch with businesses. In fact, Gartner reports 92% of all contact is through the center. And it’s been reported that 70% to 90% of what happens with customers is driven by human nature, having nothing to do with technology. State of the art technology is a necessity today, but it is meant to enable human endeavors, not to disable them.
I often talk about taking customer service and ‘kicking it up a notch.’ In the food industry, the word ‘lagniappe’ is often used. Its definition is “a small present given to a customer with a purchase. For example, when you go to the bakery and buy a dozen donuts or bagels, you oftentimes get a ‘free’ one or a baker’s dozen. That’s what customer service should be about–giving the customer more than they expected! Let’s bring lagniappe into the contact center industry.
If we’re going to speak about world class customer service, let’s have a working definition it so we’re all on the same page. Customer service is those activities provided by a company’s employees that enhance the ability of a customer to realize the full potential value of a product or service before and after the sale is made, thereby leading to satisfaction and repurchase.
Let’s look at the first W which is Why?
The state of customer service today is not good, be it over the phone or self service. Because 92% of people feel their call experience is important in shaping the image of a company, this reinforces the importance of centers in branding the image of their companies.
In a Mobius Management Systems Survey, here’s what happened because of poor customer service:
60% cancelled accounts with banks
36% changed insurance providers
40% changed telephone companies
35% changed credit card providers
375 changed Internet service providers
Are you one of these statistics? I certainly am.
In a study done by Purdue University and BenchmarkPortal.com, in answer to (1) how did agents satisfy your needs and handle the call, and (2) based on any negative experience, would you stop using this company in the future? the findings reveal a strong correlation between the participant’s age and the tendency to stop using the company after a bad experience.
What does this mean? Younger participants were less tolerant and more likely to move to the competition. People over 65 were found to be more demanding than those in middle age.
What can you do? Give younger callers a ‘wow’ experience–maintain their loyalty. People over 36 probably have more of an ‘emotional bank account’ with the company they are dealing with–maybe had some good experience and therefore are more willing to ‘forgive.’
In a recent study (CRM Magazine/PeopleSoft Web Seminar on How Usability Helps to Drive a Profitable Contact Center), the number of applications required for agents to access customer inquiries were:
3.7% just 1
81.5% 2 – 5
7.4% 5 – 10
7.4% more than 10
As you can see, the majority of applications are 2 – 5. The goal, of course, is to link every point of contact to one central location for a customer-centric, synchronized approach satisfying customer experiences with every interaction.
Strategies for success for world class service should include:
Respond promptly
Handle requests through the customers’ choice of medium
Be brief and clear
Reduce back and forth communications (especially in writing, i.e., email, kick it up to a phone call if it goes beyond two)
Personalized service
Delight the customer
What do we mean by delighting the customer?
Inform and educate them
Establish your expertise and professionalism
Offer options
Diffuse upset, anger, when and if necessary
Escalate, if required
Take Ownership of the call
Remember we’re still on the first W – the Why. Today’s pressures on agents are different than in the past. They are asked to handle more customer, more volume, more complex and/or complicated calls. After all if we could handle our issues with self service, we probably would not call. But if we tried self service and it didn’t work, now we’re upset and it’s an escalated call from the get go.
They’re asked to provide more information, do it faster and be available and accessible. But they are to lower costs, generate revenue, incorporate new technologies, ensure closure and commitment, deliver ‘great’ service and when? Yesterday, of course.
As a matter of fact the CDC (Center for Disease Control) has said that the causes of death for people under 65 are:
21% – environment – war, accidents, crimes
9% – health care system – doctors, hospitals, medications
17% – human biology – not because of lifestyle
53% – because of the way people choose to live their lives!!!
This is the good news and the bad news. It’s bad news because it’s more than half. However, the good news is that this is something we can do something about, it’s about choice.
The #2 W is Who should be trained?
We suggest front line agents/representatives, supervisors, team lads, managers, assistant managers, internal customers and other departments – anyone who is a touch point so that they can learn to speak the same language, and more importantly, not be in an adversarial position, but rather, together they are serving the external customer or end user.
The #3 W is Where should the training take place? Offsite vs onsite, and there are advantages and disadvantages for both.
Certainly it is most cost effective to have training on site. However, distractions are rampant as is the participant’s availability to a person or problem.
Offsite is more costly. However, there are no distractions and the participants are unavailable to other departments, their managers, or any issues. I believe there is psychic value in taking people away from their work stations and off site to acknowledge the touch jobs they have.
The #4 W is What should be included in any training? We believe the following modules provide a robust, powerful, and succinct training curriculum:
Quality Customer Service Rapport Building
Customer Expectations
Perception Shifting Conflict Resolution
Language Skills
Anger Management E-Mail Protocol
Stress Reduction Empathetic Responsiveness
Change Management
Communication/Listening Skills Interaction/Role Play
Service with a Smile
Further suggested is university certification to up the ante. The more professionally you treat your employees, the more professionally they will treat your customers.
The #5 W is When. We say for new hires, monthly, ongoingly, consistently, whenever change occurs, when stressors increase, and as needed.
We further suggest that each employee get a minimum of 24 hours per year of ongoing training, spread out over time for the most absorption. We divide our trainings into two four hour sessions per day and deliver 6 days per employee. Therefore, 30 people can participate in the training per day. If there has been no ongoing training, we do four days once a month for four months and then a session three months later, and then another three months later. In this manner, training is customized, in real time, and can address whatever challenges are presented when they occur.