I am frequently asked by clients and colleagues: Should I buy a house to live in or should I just rent? Should I get rid of or reduce my mortgage by moving into a smaller property?
Is it a good time to invest in a property or a piece of land? There are so many foreclosures out there – maybe there are some bargains to be had?
With the volatility in housing markets around the world, it’s very hard to know what action to take. Economists talk one day of a possible fall of 30% in the housing market and the next day they’ve changed their minds and they predict just a 15% drop. Whom can you trust and how reliable is the information we receive in the media and in our papers?
I have many clients around the world who are just dying to get back into property investing – why? Because they see that they are getting a very low return on their money in the bank – very often only 1,2 or 3% if they are lucky. They want to have something that brings them an income for their retirement and also hope that the value of the property will go up over time.
Today, I’m going to look at the various options available to you and their respective advantages and pitfalls.
The first thing to say is please do not be fooled by the media’s constant reporting of “green shoots” of recovery. There is very little evidence showing any recovery. There are three main reasons why it is likely that house prices will continue to fall for the foreseeable future:
- rising unemployment. The more people that are out of work – they cannot afford their mortgages and thus have to relinquish their homes. This means that more properties for sale come onto the market and thus drive the prices down. For example, if there is too much availability of rice and no one wants to buy it, then in order to attract buyers, the price has to be reduced. The housing market is no different. If you really want to sell a house in a falling market, you need to price it at least 20% below the average price in that area in order to generate some interest
- banks are now wanting at least 20% deposit. During the housing boom, banks were lending money to people often without asking them for a deposit at all. I saw this happening when I had my property investment company in the UK – they were lending to people who were on unemployment benefit! How irresponsible can you get? So because the banks have got into trouble, they have now tightened up their rules and are asking people for at least a 20% deposit. So this means that fewer people can get mortgages and thus afford to buy a house.
- interest rates will go up in the medium term. The reason why prices have gone up for such an extended period is because interest rates have steadily come down, which has meant that your mortgage payments have steadily gone down. In fact, in the US, they are now at 0%. However, there are already signs that the banks are going to increase interest rates and it is more than likely that they will start to go up in the next year or two. What this means for the housing market, is that fewer people will be able to afford to take out a mortgage and so more houses will be on the market and thus prices will fall further.
So those are the reasons why property prices are likely to either fall or at least remain static for the foreseeable future.
With this in mind, should you rent or should you buy?
It depends largely on your financial situation.
There are six conditions upon which I would consider buying a property to live in right now:
- You find an absolute bargain. This would be based on you having done extensive research on all the other properties in the area. For example, if the average price right now is $200,000 and you find something for $100,000 that is a foreclosure, then that might be a good buy. However, it is only a good buy if you can afford it.
- You have at least a 20% deposit and you have at least 12 months emergency funds in savings to cover unexpected situations
- If you are buying the property with a spouse or partner, you calculate your outgoings for just one income or even no income for a period of time – what happens if one or both of you gets laid off for an extended period of time and you cannot find other employment?
- You calculate your costs based upon interest rates going up which means that your mortgage will go up - so you need to have plenty of buffer monies
- You include in your calculations, the possibility of other costs rising such as property taxes, utilities, telephone, food etc. Many Councils are saying that your property is worth $1M and they are charging you taxes on that amount when in fact you could only get $200K for your property if you sold it.
- You are willing to hold onto the property for at least ten years before you may see an increase in its value.
Remember to keep in mind that if you buy now, you may be sorry as the property you buy for $300000 may only be worth $250000 within a few months. However, I have a client in Michigan and her property a year ago was worth $1M – now she has it on the market for $250K and she still cannot find a buyer. If you do buy a property, don’t have expectations that that property is going to go up in value anytime soon.
If you can satisfy all these conditions and you are not going in by the skin of your teeth – then off you go – happy house hunting!
If you cannot satisfy all those conditions, then I suggest you stick to renting for now. In fact, rents should also start to come down too and you may be able to negotiate a better deal with your landlord. The advantage of renting is that you are not tied into any mortgage agreement and you can be more flexible. If prices continue to fall, you may find that you are in a better position to pick up a bargain when the time comes.
For those of you who are struggling with your mortgage payments at the moment, try to negotiate a better deal with your bank. They would still prefer to have you in the property paying part of the mortgage rather than going through the procedure of foreclosure which usually costs them a whole lot more money. I knew someone who was having trouble paying her mortgage and she managed to negotiate a year’s holiday from paying the mortgage while she got herself back on her feet. It’s a bit like the negotiation we talked about last week – you have to be willing to ask. Also, if one bank does not want to negotiate, try to find one that will.
Depending on the size of your mortgage, you may consider moving to a smaller property so that you can either free yourself of debt altogether or at least reduce your monthly payments.
If you owe a lot of money on your property and you can still get some equity out and get rid of your mortgage altogether, I would suggest that you seriously consider taking that option. Then you are free to buy later when the prices have come down further.
If you have a property in a block of flats, or a condominium, where you are sharing the service charges – if many people in that block of flats have their apartments foreclosed, then the people who are still living there have to take on the added burden of those maintenance costs and if there are a lot of people out of work and not buying merchandise, then cities have to make up the money that they are nto collecting for taxes in some other way. Chances are that one of the first things they will be do will be to increase your property taxes substantially.
People really don’t know what to do with their money and because property investment has been such a good bet in recent years, there are many people itching to get back into the market. But is this the right time? It’s very difficult to pick the top and the bottom of any market – even the experts will tell you that that is almost impossible, but what you can do is to see the trend. With the degree of change that is happening right now, trends are much more difficult to predict, and for the average person, who is not well-informed on the housing market, it is best to wait until things have settled down somewhat before making a major purchase.
For those of you who are looking to invest, here are a few conditions I would suggest that you consider before putting your hard-earned money into property at this time:
- during a recession or depression, people have less available funds and may not be able to afford to rent. So you may need to drop your rental price. This is all right is you have no debt on the property and you have paid in cash – then you will not be too affected if you cannot find a tenant or if rental values go down for a few years. So if you are paying cash and you don’t need a mortgage, then buying a “real bargain” in a good location is a possibility. However, once again, don’t expect the value of the property to go up in value anytime soon.
- If you are taking out a mortgage, I would suggest that you do not take out more than 50-60% of the property price. Then if interest rates go up, your property taxes go up, your property sits vacant for a year or more, you will stillbe able to afford the outgoings. But you must be prepared to sit on the property for a few years and have your money tied up. Remember that selling a property is not a quick exercise and you may have to wait several months or even years to access your cash.
Buying land is even more risky as you do not have a property on it to bring you a regular income. You would either have to hang onto the land until such time as prices go up – which could be many years away – or you could build on the land and hopefully find tenants to bring you an income. However, I know people who own sections around the world and they are having great difficulty selling them right now. Indeed, in Fiji, a couple have had to reduce their section by 50% and they still have not found anyone to buy it. I see this happening around the world. Land, unless you are using it for yourself, is largely unproductive and does not bring you an income. So unless you are using it yourself e.g. to grow vegetables, for farming, livestock and you have a business that brings you an income from your land, then it is not the best investment during a downturn economy.
Summary
Do not leverage yourself too highly – i.e. don’t take out too much debt and make sure you have plenty of buffer funds
In volatile times, best to play it safe and not to borrow too much. Remember if you buy with a 20% deposit and the house price drops 20% you have lost all your equity.
If you rent – you are flexible, you can move quickly and you will be able to pick up the bargains at a later date
Investors: - not the best time to be buying – not only are rental yields low, but leverage is not wise now as there is no promise of capital gain in the near future. If you are paying cash, the risk is much lower and you can afford to wait and sit it out
If you are buying without too much debt – i.e. preferably only 50-60% and you know you can afford the mortgage and rising property taxes and other costs, then ok, but if not, then wait.
If you want to extend or renovate your house – this is going to be a good time:
-builders are looking for work and are willing to negotiate on their labour costs.
Sunday, October 25, 2009
Sunday, September 20, 2009
Credit Card Debt - how to free yourself
As amazing as it seems, most people do not understand credit card debt. They see a refrigerator and they think – oh, it’s only $10 a month for the refrigerator. We can afford that can’t we? They don’t think in terms of how much money is on their credit cards as a total amount. They just see it as another sum of money they will have to come up with each month, and while $10 a month more may sound reasonable and doable, that $10 a month, added to what they already owe, may tally into the thousands of dollars.
What they also may not understand, is that $10 a month is going towards a $700 refrigerator – by the time it’s paid off, they would have been able to buy 3 refrigerators for all the finance charges they had to pay over the years.
I know a woman who only bought merchandise that was on sale – whether she needed it or not – if it was on sale, she bought it. She had a closet full of clothing that she had bought over the years, most of which she had never worn, but they were all on sale so she bought them. And with each blouse or dress, she added to her collection in the closet, I kept hearing her tell me about the wonderful bargain she had got and how much money she had saved. These articles of clothing stayed in her closet unworn for years at a time- while she stuck to just a few outfits that felt comfortable on her. She was struggling to pay her bills – I said to her – stop shopping – and she said: that’s the only thing my husband and I enjoy doing together.
I told her that she and her husband needed to develop another hobby. They did. They started eating. Gargantuan amounts of food so she couldn’t even get into any of her bargain clothing. This went on for several years. When she lost her job and couldn’t find employment, I started to counsel her on her spending habits. I wanted to know what she needed at a bare minimum to survive. Part of me was afraid to ask her how much her credit card debt amounted to – but I did anyway. When she told me she had racked up $50000, it took everything in me not to let out a loud gasp in shock. I then proceeded to give her financial counselling for many years after that – and now I’m pleased to say that she’s free of credit card debt and she even has $4000 in her savings account.
Credit cards are very seductive. When they first came into existence, people used them for the purpose for which they were intended – as emergency funds. Your car breaks down, you have no cash, no savings, nothing that you could use to pay the towtruck to come and rescue you for the repairs that are needed at a service station, so you whipped out your trusty little credit card that was on hand just for an emergency, and you breathed a sigh of relief when they put on a new fan belt or a new radiator or a new tyre to replace the one that had just blown – and that’s what credit cards were supposed to be used for.
But over the years, people have become very irresponsible with their finances. These credit cards are no longer being used just for emergencies by most people. They are being used for a better way of life, a higher standard of living, expensive purchases that they don’t really need. And the credit card debt just keeps going up and up and up – and they pay no attention to it as long as they can make their payments.
When they are laid off from their job or fired, and their income goes out of the window, they suddenly become aware of payments that they cannot meet. And still it doesn’t occur to them that they have become credit card junkies. When they are facing bankruptcy and they have to go for consumer counselling and all their credit cards are taken away from them, while the credit card counsellor negotiates with the credit card companies for manageable payments, it’s like having withdrawal symptoms. And never underestimate the fact that they are not only having financial withdrawal symptoms but emotional ones as well. Because now, they cannot see a way of life that doesn’t feel hopeless.
To illustrate this point, during the Cuban missile crisis of October 1962, the people in Miami, Florida, were only 90 miles away from Cuba when the threat of being bombed and blown out of existence became a very real possibility. Emotions ran high, people panicked and the main attitude of the residents was – if I’m going to die, I might as well enjoy my last few days. They rushed to the stores in droves. They charged all kinds of luxury items on their credit cards because they never really expected to have to pay them off. After all, if they were going to be bombed, they wouldn’t have to pay the consequences, so they might as well enjoy themselves. They bought television sets, they bought boats, they bought cars. They bought all the things that they never could have afforded if they lived to be over 100.
The Cuban crisis was averted. Miami stayed intact, people went on with their lives – except one vast difference –now they had credit card debt up to their eyeballs. They had big ticket items that they couldn’t afford and wouldn’t be able to use. They had small ticket items too, but a great many of them - again with purchases that were totally unnecessary, extravagant and way beyond their budget.
The economy of that state was in great jeopardy. People’s homes were foreclosed, their cars and their boats were repossessed and people were out on the street. Businesses went under when their customers couldn’t afford to pay their debts.
Now if we look at what took place in 1962, a little under 40 years ago, and we multiply it by many millions of dollars more, we get to see the beginnings of what would eventually affect a global economy.
To summarise:
- be aware that your minimum monthly payment may seem to be a small amount, but you are paying several times over the original purchase price for your goods
- learn to use your credit cards only for emergencies and nothing else
- don’t incur any more debt than you already have
Let’s take a look at how our global economy got to be in such a mess. As we discussed with the Cuban Missile Crisis in 1962, we saw that what started with one small state in the US, became a temptation of easy living with no responsibility for paying off those debts. This is something that is felt around the world. I doubt if there is a country in the world now that doesn’t have its fair share of problems with people who are tempted to go into debt for luxuries that they cannot afford. We have only to look at the banking institutions, the financial institutions, with people who have got mortgages for nothing down, or 5% or 10% down, who would not have qualified as creditworthy if the banks had really vetted these people properly.
Now let’s look at cash advances. Again this is something that credit card companies have made too easy for its users. If it’s used appropriately for emergencies and nothing else, consumers might be better able to pay off these debts. Unfortunately, many people look at a cash advance differently. They ignore the fact that their finance charges start the minute they make that cash advance and that interest keeps accruing every single day from the first day of that loan. If they bothered to do the maths, they would have the option of seeing whether or not taking that cash advance was really of benefit to them.
More often than not, these cash advances are not paid off quickly, but they just get added into their ongoing credit card debt. Not enough people look at their statement each month to see how much money is going towards their cash advance and how much money is going towards their monthly charge –and those rates differ greatly.
Now let’s take a look at balance transfers. The average consumer sees a balance transfer as an quick way to pay off their credit cards, perhaps by combining all their payments into one, two or three payments instead of maybe ten payments. And if it were that simple, perhaps their credit card debt would be more manageable. But let’s look at some of the seductive ways that banks have of tempting you to do these balance transfers. During the good times, banks will offer a 0% finance charge for a certain number of months and then a higher charge for the remainder of the loan – and if you just looked at that, it might seem reasonable. But money has a way of making you greedy – so you may not look too closely at the fact that you may be paying $90 or $120 for every transaction you make on this balance transfer. Let’s say you want to pay off four of your credit cards: and you are going to transfer them onto this one credit card so that you have only one payment a month. For each of those four cards that you are transferring balances from to this one card, you will have to pay a fee of at least $90.00 per transaction. So you will be paying an extra $360 just for transferring the monies on these four cards. So you may be getting 0% financing for 6 months, however, and this is a big however, in smaller print, banks are telling you that they have the right to change that balance transfer offer as they see fit. So now you are thinking you are going in at 0% for the next 6 months and 9% after that until the balance is paid off. Now a few months later, you get your statement in the mail, if you look closely enough, you may be very surprised to see your interest rate go from 9% to 13.9% - because your bank can and often does change the original offer.
Here’s another eye-opener. You call your bank and you want to know what the payoff amount is, because now you have enough money to pay off the balance. You ask them to figure out the finance charges and add it to what you are supposed to be paying – and you think to yourself when you make that payment that you are finished with it. Not so fast. Your next statement comes in and lo and behold, there are more finance charges that have been accrued that you still owe.
So it’s very easy to see how credit card debt starts and how it escalates and how hopeless it seems for a lot of individuals.
And if you are one of the many consumers who looks at your statement and says – oh I just have to pay $15 – that’s the minimum amount due and then ignore the larger balance of everything that’s due, then you are one of those people who are just paying down the interest on the loan and not a penny off the principal of the loan.
What they also may not understand, is that $10 a month is going towards a $700 refrigerator – by the time it’s paid off, they would have been able to buy 3 refrigerators for all the finance charges they had to pay over the years.
I know a woman who only bought merchandise that was on sale – whether she needed it or not – if it was on sale, she bought it. She had a closet full of clothing that she had bought over the years, most of which she had never worn, but they were all on sale so she bought them. And with each blouse or dress, she added to her collection in the closet, I kept hearing her tell me about the wonderful bargain she had got and how much money she had saved. These articles of clothing stayed in her closet unworn for years at a time- while she stuck to just a few outfits that felt comfortable on her. She was struggling to pay her bills – I said to her – stop shopping – and she said: that’s the only thing my husband and I enjoy doing together.
I told her that she and her husband needed to develop another hobby. They did. They started eating. Gargantuan amounts of food so she couldn’t even get into any of her bargain clothing. This went on for several years. When she lost her job and couldn’t find employment, I started to counsel her on her spending habits. I wanted to know what she needed at a bare minimum to survive. Part of me was afraid to ask her how much her credit card debt amounted to – but I did anyway. When she told me she had racked up $50000, it took everything in me not to let out a loud gasp in shock. I then proceeded to give her financial counselling for many years after that – and now I’m pleased to say that she’s free of credit card debt and she even has $4000 in her savings account.
Credit cards are very seductive. When they first came into existence, people used them for the purpose for which they were intended – as emergency funds. Your car breaks down, you have no cash, no savings, nothing that you could use to pay the towtruck to come and rescue you for the repairs that are needed at a service station, so you whipped out your trusty little credit card that was on hand just for an emergency, and you breathed a sigh of relief when they put on a new fan belt or a new radiator or a new tyre to replace the one that had just blown – and that’s what credit cards were supposed to be used for.
But over the years, people have become very irresponsible with their finances. These credit cards are no longer being used just for emergencies by most people. They are being used for a better way of life, a higher standard of living, expensive purchases that they don’t really need. And the credit card debt just keeps going up and up and up – and they pay no attention to it as long as they can make their payments.
When they are laid off from their job or fired, and their income goes out of the window, they suddenly become aware of payments that they cannot meet. And still it doesn’t occur to them that they have become credit card junkies. When they are facing bankruptcy and they have to go for consumer counselling and all their credit cards are taken away from them, while the credit card counsellor negotiates with the credit card companies for manageable payments, it’s like having withdrawal symptoms. And never underestimate the fact that they are not only having financial withdrawal symptoms but emotional ones as well. Because now, they cannot see a way of life that doesn’t feel hopeless.
To illustrate this point, during the Cuban missile crisis of October 1962, the people in Miami, Florida, were only 90 miles away from Cuba when the threat of being bombed and blown out of existence became a very real possibility. Emotions ran high, people panicked and the main attitude of the residents was – if I’m going to die, I might as well enjoy my last few days. They rushed to the stores in droves. They charged all kinds of luxury items on their credit cards because they never really expected to have to pay them off. After all, if they were going to be bombed, they wouldn’t have to pay the consequences, so they might as well enjoy themselves. They bought television sets, they bought boats, they bought cars. They bought all the things that they never could have afforded if they lived to be over 100.
The Cuban crisis was averted. Miami stayed intact, people went on with their lives – except one vast difference –now they had credit card debt up to their eyeballs. They had big ticket items that they couldn’t afford and wouldn’t be able to use. They had small ticket items too, but a great many of them - again with purchases that were totally unnecessary, extravagant and way beyond their budget.
The economy of that state was in great jeopardy. People’s homes were foreclosed, their cars and their boats were repossessed and people were out on the street. Businesses went under when their customers couldn’t afford to pay their debts.
Now if we look at what took place in 1962, a little under 40 years ago, and we multiply it by many millions of dollars more, we get to see the beginnings of what would eventually affect a global economy.
To summarise:
- be aware that your minimum monthly payment may seem to be a small amount, but you are paying several times over the original purchase price for your goods
- learn to use your credit cards only for emergencies and nothing else
- don’t incur any more debt than you already have
Let’s take a look at how our global economy got to be in such a mess. As we discussed with the Cuban Missile Crisis in 1962, we saw that what started with one small state in the US, became a temptation of easy living with no responsibility for paying off those debts. This is something that is felt around the world. I doubt if there is a country in the world now that doesn’t have its fair share of problems with people who are tempted to go into debt for luxuries that they cannot afford. We have only to look at the banking institutions, the financial institutions, with people who have got mortgages for nothing down, or 5% or 10% down, who would not have qualified as creditworthy if the banks had really vetted these people properly.
Now let’s look at cash advances. Again this is something that credit card companies have made too easy for its users. If it’s used appropriately for emergencies and nothing else, consumers might be better able to pay off these debts. Unfortunately, many people look at a cash advance differently. They ignore the fact that their finance charges start the minute they make that cash advance and that interest keeps accruing every single day from the first day of that loan. If they bothered to do the maths, they would have the option of seeing whether or not taking that cash advance was really of benefit to them.
More often than not, these cash advances are not paid off quickly, but they just get added into their ongoing credit card debt. Not enough people look at their statement each month to see how much money is going towards their cash advance and how much money is going towards their monthly charge –and those rates differ greatly.
Now let’s take a look at balance transfers. The average consumer sees a balance transfer as an quick way to pay off their credit cards, perhaps by combining all their payments into one, two or three payments instead of maybe ten payments. And if it were that simple, perhaps their credit card debt would be more manageable. But let’s look at some of the seductive ways that banks have of tempting you to do these balance transfers. During the good times, banks will offer a 0% finance charge for a certain number of months and then a higher charge for the remainder of the loan – and if you just looked at that, it might seem reasonable. But money has a way of making you greedy – so you may not look too closely at the fact that you may be paying $90 or $120 for every transaction you make on this balance transfer. Let’s say you want to pay off four of your credit cards: and you are going to transfer them onto this one credit card so that you have only one payment a month. For each of those four cards that you are transferring balances from to this one card, you will have to pay a fee of at least $90.00 per transaction. So you will be paying an extra $360 just for transferring the monies on these four cards. So you may be getting 0% financing for 6 months, however, and this is a big however, in smaller print, banks are telling you that they have the right to change that balance transfer offer as they see fit. So now you are thinking you are going in at 0% for the next 6 months and 9% after that until the balance is paid off. Now a few months later, you get your statement in the mail, if you look closely enough, you may be very surprised to see your interest rate go from 9% to 13.9% - because your bank can and often does change the original offer.
Here’s another eye-opener. You call your bank and you want to know what the payoff amount is, because now you have enough money to pay off the balance. You ask them to figure out the finance charges and add it to what you are supposed to be paying – and you think to yourself when you make that payment that you are finished with it. Not so fast. Your next statement comes in and lo and behold, there are more finance charges that have been accrued that you still owe.
So it’s very easy to see how credit card debt starts and how it escalates and how hopeless it seems for a lot of individuals.
And if you are one of the many consumers who looks at your statement and says – oh I just have to pay $15 – that’s the minimum amount due and then ignore the larger balance of everything that’s due, then you are one of those people who are just paying down the interest on the loan and not a penny off the principal of the loan.
Saturday, September 12, 2009
Gold over $1000 an ounce
As I predicted in March 2008, October 2008, January 2009 and March 2009, I said that gold would increase in price substantially and would go over $1000.00. This week it is at $1005 per ounce. So where will it go from here?
With the Chinese stocking up on their gold reserves, Hong Kong deciding to take all its reserves out of a London depository and open their own holding at Hong Kong airport, with Russia saying that it’s advisable to have at least 10% of their assets in gold, there are signs worldwide that gold is becoming a more interesting commodity, even for the average person. Indeed in China, they Chinese public are being encouraged to buy gold and silver.
Nearly $2 trillion tax dollars have already been spent on bailouts of financial institutions and banks so far in the US, but we are probably about halfway through the unwinding of the mortgage bubble in the USA. There is still a lot of pain to come in terms of writedowns and losses that have yet to be recognised.
Things are going to be much worse than anyone anticipates. There were two other kinds of mortgages that became very popular. There were option arms which lured in all kinds of investors with very low “teaser rates” for 2, 3 or 5 years, but after that the interest rate goes up substantially. The other type is called Alt A loans and they too were given to people on low rates and the unwinding of these mortgages is yet to come. A mortgage of say $800 a month could easily jump to $1500. Now these loans are starting to reset causing mortgage payments to go up and owners to default. This will lead to more foreclosures. This is a time bomb. We are at the beginning of the second wave.
With this in mind, it is likely that more people will rush into the safety of gold. So expect the price to go up to $1500 or more within the next year or so.
With the Chinese stocking up on their gold reserves, Hong Kong deciding to take all its reserves out of a London depository and open their own holding at Hong Kong airport, with Russia saying that it’s advisable to have at least 10% of their assets in gold, there are signs worldwide that gold is becoming a more interesting commodity, even for the average person. Indeed in China, they Chinese public are being encouraged to buy gold and silver.
Nearly $2 trillion tax dollars have already been spent on bailouts of financial institutions and banks so far in the US, but we are probably about halfway through the unwinding of the mortgage bubble in the USA. There is still a lot of pain to come in terms of writedowns and losses that have yet to be recognised.
Things are going to be much worse than anyone anticipates. There were two other kinds of mortgages that became very popular. There were option arms which lured in all kinds of investors with very low “teaser rates” for 2, 3 or 5 years, but after that the interest rate goes up substantially. The other type is called Alt A loans and they too were given to people on low rates and the unwinding of these mortgages is yet to come. A mortgage of say $800 a month could easily jump to $1500. Now these loans are starting to reset causing mortgage payments to go up and owners to default. This will lead to more foreclosures. This is a time bomb. We are at the beginning of the second wave.
With this in mind, it is likely that more people will rush into the safety of gold. So expect the price to go up to $1500 or more within the next year or so.
Friday, September 4, 2009
Entitlement Issues - why they are causing our economic crisis on a global and a personal level
Let's take a look at how entitlement works globally and see the reasons behind our bank failures, our pension failures, our financial institutions and then we’ll bring it into a very personal level of how our attitudes of entitlement are bringing failures into our own lives.
We’ll look at ways to reverse this.
We’ll look at the issue of why our attitudes of entitlement are a luxury that we can no longer afford.
In the old days, on a global level, our standard of living was much lower. Our cars were basic, our entertainment was much less costly and in most economies around the world, families were able to make it on one income.
Over the years, as our standard of living rose higher and higher, it now takes two incomes just to survive. Instead of using one car for the family, now we see two cars or more for the family. Instead of just going to a movie and some place inexpensive for dinner for a special night out – now we have very expensive forms of entertainment.
In the old days, when we had a much lower standard of living people actually sat around in the evening and talked to one another. They even read books. They listened to the radio and used their imagination to recreate the scenes in their heads. If you had a telephone, it was a luxury. People made appointments to see one another, they didn’t sit on the phone for hours on end. Nowadays, there’s very little personal interaction. People sit on cellphones, they do text messaging, they sit on their computers, they do instant messaging, emails or messageboards – and social interaction has become a thing of the past. We are now leading very insular lives and the end result is that we have more cases of depression, especially among teenagers and young adults. We see more people today on anti-depressants than any other time in the history of mankind. This is more than just being dissatisfied with your lot in life. It has more to do with feeling a lack of purpose in your life. Having family and friends around you to share the good times and the bad times. This is about being able to live your life without having a single person in your life. Anything and everything that you can possibly want or need can be purchased online. You don’t ever have to leave your house. In so many different ways we can see the breakdown of the family and of the community coinciding with the breakdown of the economy.
The higher standard of living that we’ve grown accustomed to isn’t really about buying toilet paper in different colours, but it’s actually separating ourselves from the family unit. Instead of listening to the radio and using our creative imagination, or reading a book and letting it take us to different locales, now we have to be entertained. Now we don’t entertain ourselves. Now we need TV, video games, the internet…but the worst part is that we have isolated ourselves from each other.
Instead of conversation, we plant ourselves in front of TV’s. Instead of board games that can be played with the family, we’re now playing games on the computers – we’re having online relationships that are usually disappointing and we aren’t reading books like we used to. People used to have to develop social skills. Now with modern technology and a lack of social interaction, social skills seem to be at the bottom of the list of priorities.
Unfortunately the ills of society cannot be reversed by waving a magic wand over them. As a rule people don’t change unless they are forced to change. So how do we get past this attitude of entitlement? That the world owes us a living? That if you don’t have what you want that it’s ok to steal?
How do we go back to the basics of child-rearing?
Where the parents made the rules and the children obeyed them.
How do we get parents to see that their permissive attitude is damaging their children?
That it’s not ok to whine and cry until you get your own way. That we’re raising a generation of children who are growing up to be irresponsible adults who are not held accountable for their actions.
These same children will grow up to be dissatisfied with life, blaming others for their failures and not able to hold down a job.
So before we can fix the economy, we have to fix ourselves. We have to learn how to put back into the community what we have taken from it. We have to hold our bankers and our financial institutions accountable for everything. Our greed on a personal level corresponds with the greed on a corporate level. We have only to look at the increase in shoplifting to the CEO’s of major corporations who have stolen from their company’s pension funds. Now that we’re facing very very hard times, we need to see how our attitude is causing our own destruction.
When the economy started to go down, a taxi driver in New York City was asked what he was going to do if people didn’t have enough money to take taxis and he couldn’t pay his bills. Without batting an eyelid and having to think twice about it, he said “I’d steal.”
I heard of a woman in her 40’s who walked through the produce department of a supermarket and started to eat the grapes and cherries that were on display. She didn’t pay for them, nor did she feel guilty for having taken them. It was as if she had the right to sample whatever goods were out there. Although security would not have been called for pilfering grapes, especially since the goods would not be found on her, it’s easy to see why a storeowner’s losses would have to be passed onto its customers.
When doctors and patients submit fraudulent insurance claims – those costs aren’t just washed away – they get passed onto the other people who are insured.
I recently heard of a man who went into the hospital and was there for close to a month. A neighbour of his was one of his golfing buddies, and he was also a doctor. And every day he came to the hospital, he said hello to his friend. They talked about gold, about politics, their hobbies… and not once did he discuss this man’s medical problems .. and this man thought it was very nice of his neighbour to drop by. When he got his bill from the hospital, he was absolutely outraged to see that that neighbour charged his insurance company for every single visit for the month that he was there.
While most people would shrug their shoulders and not do anything about it because they didn’t have to pay for it out of their own pocket, this man called his insurance company and reported the fraud. He then called this doctor friend of his and told him that if he didn’t call the insurance company and rectify his mistake, he was going to contact the media and start an investigation. They lived in a small town and the doctor realised that he would be forced out of business if he didn’t drop the charges, which is probably the only reason he eventually notified the insurance company that he was dropping those charges.
The entitlement issues we face today can be traced back to the low standards we set for our children. The bar needs to be set higher, much higher. We are raising children who reach adulthood as grasping individuals taking whatever they can from whomever they wish without stopping to question their actions.
I recently heard of a widow in her late 50’s who sold the farm that she and her husband had owned for all of their marriage. She moved to a smaller place and planned on using the profits from the sale as her retirement income. Her children were so angry that they even refused to speak to her. They felt that the money from the sale was their inheritance and it should go to them. What kind of distorted thinking is that? She and her husband had worked the farm, had put in their life’s energy in that farm and she had every right to sell it and do whatever she wished with the money she received from it. Her adult children were living their own lives, earning their own money, and not supporting her. They weren’t entitled to one cent, yet they are trying to make her feel guilty for taking what she so rightfully earned.
In the US, they have been conducting surveys among middle management to upper-management employees who were laid off when their company’s downsized. There seems to be a growing trend among these people to try for a few months to find other employment, but then shortly afterwards, they give up and stop looking because they cannot find a job that pays the same kind of money. What we see happening to these people – they empty out their retirement funds, their pensions, their savings accounts, their family’s savings accounts, and mortgage their houses to the hilt. They have decided not to look for a job. If they cannot get the kind of money that they had been making, they are choosing to go on unemployment for however long it lasts and to live off everyone else. Some of them are sending their spouses to work at menial jobs, others are collecting food stamps and welfare and this number is growing rapidly. These are people who are able-bodied and capable of working but who choose not to – and society is supporting them.
You don’t have to look further than this to see how a country’s economic crisis is irrevocably tied to the entitlement issues of its populace.
A couple of years ago, I heard of a teenager who asked her father for a car after she got her license. Her parents were divorced and her father was trying to compensate for not being in the house as a full-time dad. He didn’t have much money so he got her a new Volkswagen. She was so angry that he didn’t get her a luxury car, that she deliberately rammed her car into a stone wall and practically demolished it. Her father couldn’t even claim on the insurance because it was deliberate. He ended up buying her a used car so that she would have transportation. This father, as well-meaning as he probably thought he was, only contributed to his daughter’s sense of entitlement. Had I been that child’s parent, I would never have bought her a replacement car and I would have had her go out and get a job and pay back, each week from her salary, every penny of the amount of the new car that she had been given.
This disregard for property, for other people’s financial problems, and for other people’s feelings represents the kind of attitude that is running rampant among many cultures. When parents accept this kind of behaviour from their children, they are setting their children up for failure as adults and of course this plays right into the failure of the economy of countries around the world.
How can we expect our politicians, our bankers, our financial institutions, our corporations, to exhibit more accountability than we expect from our own children?
Many children, single and married, move back home into their parents’ home because they cannot afford to make it on their own. At what point does a parent know that a child must learn how to survive on their own and stop taking money from their parents? At what point do parents know when they are causing more harm than good by continuing to treat their offspring as children? When they continue to make life easy for their children, these children will not know how to survive on their own when their parents die. It is far better to teach children moral and financial responsibility when they are young than have to learn it the hard way when they are older.
I had to learn this the hard way myself. My father kept on giving me money, even when I was in my 30’s and I never really learned how to be independent financially. It took me telling him that I didn’t need his help (even when I really did at the time), and then I learned how to stand on my own two feet and how to earn and manage money effectively.
I could go on and on giving you examples of entitlement in every strata of society, but the ones that I have cited are ample demonstrations of how we’re contributing to the downfall of our economy. We’re doing this on the local level, the national level and the international level. We’re taking the path of least resistance and while we’re holding everyone else accountable for their actions, we’re taking no responsibility for our own.
It’s time to reverse the status quo: Let’s try an experiment: for one week, between this show and next week’s show, try denying yourself something 3 times a day. Learn how to say no to yourself. Learn how to question your actions, how to observe them and question the validity of them.
We’ll look at ways to reverse this.
We’ll look at the issue of why our attitudes of entitlement are a luxury that we can no longer afford.
In the old days, on a global level, our standard of living was much lower. Our cars were basic, our entertainment was much less costly and in most economies around the world, families were able to make it on one income.
Over the years, as our standard of living rose higher and higher, it now takes two incomes just to survive. Instead of using one car for the family, now we see two cars or more for the family. Instead of just going to a movie and some place inexpensive for dinner for a special night out – now we have very expensive forms of entertainment.
In the old days, when we had a much lower standard of living people actually sat around in the evening and talked to one another. They even read books. They listened to the radio and used their imagination to recreate the scenes in their heads. If you had a telephone, it was a luxury. People made appointments to see one another, they didn’t sit on the phone for hours on end. Nowadays, there’s very little personal interaction. People sit on cellphones, they do text messaging, they sit on their computers, they do instant messaging, emails or messageboards – and social interaction has become a thing of the past. We are now leading very insular lives and the end result is that we have more cases of depression, especially among teenagers and young adults. We see more people today on anti-depressants than any other time in the history of mankind. This is more than just being dissatisfied with your lot in life. It has more to do with feeling a lack of purpose in your life. Having family and friends around you to share the good times and the bad times. This is about being able to live your life without having a single person in your life. Anything and everything that you can possibly want or need can be purchased online. You don’t ever have to leave your house. In so many different ways we can see the breakdown of the family and of the community coinciding with the breakdown of the economy.
The higher standard of living that we’ve grown accustomed to isn’t really about buying toilet paper in different colours, but it’s actually separating ourselves from the family unit. Instead of listening to the radio and using our creative imagination, or reading a book and letting it take us to different locales, now we have to be entertained. Now we don’t entertain ourselves. Now we need TV, video games, the internet…but the worst part is that we have isolated ourselves from each other.
Instead of conversation, we plant ourselves in front of TV’s. Instead of board games that can be played with the family, we’re now playing games on the computers – we’re having online relationships that are usually disappointing and we aren’t reading books like we used to. People used to have to develop social skills. Now with modern technology and a lack of social interaction, social skills seem to be at the bottom of the list of priorities.
Unfortunately the ills of society cannot be reversed by waving a magic wand over them. As a rule people don’t change unless they are forced to change. So how do we get past this attitude of entitlement? That the world owes us a living? That if you don’t have what you want that it’s ok to steal?
How do we go back to the basics of child-rearing?
Where the parents made the rules and the children obeyed them.
How do we get parents to see that their permissive attitude is damaging their children?
That it’s not ok to whine and cry until you get your own way. That we’re raising a generation of children who are growing up to be irresponsible adults who are not held accountable for their actions.
These same children will grow up to be dissatisfied with life, blaming others for their failures and not able to hold down a job.
So before we can fix the economy, we have to fix ourselves. We have to learn how to put back into the community what we have taken from it. We have to hold our bankers and our financial institutions accountable for everything. Our greed on a personal level corresponds with the greed on a corporate level. We have only to look at the increase in shoplifting to the CEO’s of major corporations who have stolen from their company’s pension funds. Now that we’re facing very very hard times, we need to see how our attitude is causing our own destruction.
When the economy started to go down, a taxi driver in New York City was asked what he was going to do if people didn’t have enough money to take taxis and he couldn’t pay his bills. Without batting an eyelid and having to think twice about it, he said “I’d steal.”
I heard of a woman in her 40’s who walked through the produce department of a supermarket and started to eat the grapes and cherries that were on display. She didn’t pay for them, nor did she feel guilty for having taken them. It was as if she had the right to sample whatever goods were out there. Although security would not have been called for pilfering grapes, especially since the goods would not be found on her, it’s easy to see why a storeowner’s losses would have to be passed onto its customers.
When doctors and patients submit fraudulent insurance claims – those costs aren’t just washed away – they get passed onto the other people who are insured.
I recently heard of a man who went into the hospital and was there for close to a month. A neighbour of his was one of his golfing buddies, and he was also a doctor. And every day he came to the hospital, he said hello to his friend. They talked about gold, about politics, their hobbies… and not once did he discuss this man’s medical problems .. and this man thought it was very nice of his neighbour to drop by. When he got his bill from the hospital, he was absolutely outraged to see that that neighbour charged his insurance company for every single visit for the month that he was there.
While most people would shrug their shoulders and not do anything about it because they didn’t have to pay for it out of their own pocket, this man called his insurance company and reported the fraud. He then called this doctor friend of his and told him that if he didn’t call the insurance company and rectify his mistake, he was going to contact the media and start an investigation. They lived in a small town and the doctor realised that he would be forced out of business if he didn’t drop the charges, which is probably the only reason he eventually notified the insurance company that he was dropping those charges.
The entitlement issues we face today can be traced back to the low standards we set for our children. The bar needs to be set higher, much higher. We are raising children who reach adulthood as grasping individuals taking whatever they can from whomever they wish without stopping to question their actions.
I recently heard of a widow in her late 50’s who sold the farm that she and her husband had owned for all of their marriage. She moved to a smaller place and planned on using the profits from the sale as her retirement income. Her children were so angry that they even refused to speak to her. They felt that the money from the sale was their inheritance and it should go to them. What kind of distorted thinking is that? She and her husband had worked the farm, had put in their life’s energy in that farm and she had every right to sell it and do whatever she wished with the money she received from it. Her adult children were living their own lives, earning their own money, and not supporting her. They weren’t entitled to one cent, yet they are trying to make her feel guilty for taking what she so rightfully earned.
In the US, they have been conducting surveys among middle management to upper-management employees who were laid off when their company’s downsized. There seems to be a growing trend among these people to try for a few months to find other employment, but then shortly afterwards, they give up and stop looking because they cannot find a job that pays the same kind of money. What we see happening to these people – they empty out their retirement funds, their pensions, their savings accounts, their family’s savings accounts, and mortgage their houses to the hilt. They have decided not to look for a job. If they cannot get the kind of money that they had been making, they are choosing to go on unemployment for however long it lasts and to live off everyone else. Some of them are sending their spouses to work at menial jobs, others are collecting food stamps and welfare and this number is growing rapidly. These are people who are able-bodied and capable of working but who choose not to – and society is supporting them.
You don’t have to look further than this to see how a country’s economic crisis is irrevocably tied to the entitlement issues of its populace.
A couple of years ago, I heard of a teenager who asked her father for a car after she got her license. Her parents were divorced and her father was trying to compensate for not being in the house as a full-time dad. He didn’t have much money so he got her a new Volkswagen. She was so angry that he didn’t get her a luxury car, that she deliberately rammed her car into a stone wall and practically demolished it. Her father couldn’t even claim on the insurance because it was deliberate. He ended up buying her a used car so that she would have transportation. This father, as well-meaning as he probably thought he was, only contributed to his daughter’s sense of entitlement. Had I been that child’s parent, I would never have bought her a replacement car and I would have had her go out and get a job and pay back, each week from her salary, every penny of the amount of the new car that she had been given.
This disregard for property, for other people’s financial problems, and for other people’s feelings represents the kind of attitude that is running rampant among many cultures. When parents accept this kind of behaviour from their children, they are setting their children up for failure as adults and of course this plays right into the failure of the economy of countries around the world.
How can we expect our politicians, our bankers, our financial institutions, our corporations, to exhibit more accountability than we expect from our own children?
Many children, single and married, move back home into their parents’ home because they cannot afford to make it on their own. At what point does a parent know that a child must learn how to survive on their own and stop taking money from their parents? At what point do parents know when they are causing more harm than good by continuing to treat their offspring as children? When they continue to make life easy for their children, these children will not know how to survive on their own when their parents die. It is far better to teach children moral and financial responsibility when they are young than have to learn it the hard way when they are older.
I had to learn this the hard way myself. My father kept on giving me money, even when I was in my 30’s and I never really learned how to be independent financially. It took me telling him that I didn’t need his help (even when I really did at the time), and then I learned how to stand on my own two feet and how to earn and manage money effectively.
I could go on and on giving you examples of entitlement in every strata of society, but the ones that I have cited are ample demonstrations of how we’re contributing to the downfall of our economy. We’re doing this on the local level, the national level and the international level. We’re taking the path of least resistance and while we’re holding everyone else accountable for their actions, we’re taking no responsibility for our own.
It’s time to reverse the status quo: Let’s try an experiment: for one week, between this show and next week’s show, try denying yourself something 3 times a day. Learn how to say no to yourself. Learn how to question your actions, how to observe them and question the validity of them.
Saturday, August 29, 2009
Customer Service - The Bedrock of the Global Economy
When a country is experiencing an era of prosperity we so often see the level of customer service slipping greatly. People who work in retail, especially those who are on commission, often feel that they can let their customer service skills slide because there’s always another buyer right around the corner, and for many years, most countries have experienced prosperity. Nowadays, looking at the global economy, it’s patently clear that the economy is in deep trouble, customer service has hit a new low, and if we don’t change our attitudes about work and service, more businesses will be forced to close and more people will lose their jobs and be out of work.
You cannot separate customer service from the bottom line. With so many people competing for business, the only ones who will survive this economic downturn will be those who know how to give excellent service.
Studies show that a typical dissatisfied customer will tell 6-10 people about the problem. A typical satisfied customer will tell 1-2 people. It costs 6x more to attract a new customer than it does to keep an old one. Of those customers who stop doing business with you 68% do so because of an attitude of indifference by the company or a specific individual. About 7-10 complaining customers will do business with you again if you resolve the complaint in their favour. If you resolve a complaint on the spot, 95% of your customers will do business with you again.
How can you afford to ignore these statistics? As a business owner you stand to lose a lot of money and perhaps even your business if you ignore these statistics. As an employee you stand to lose your job if you don’t pay attention to your customer’s needs.
In the old days, people were expected to do their job and to do it well. And if they didn’t, they were fired. Today, we’re living in litigious times. Due to the recent spate of lawsuits, companies are afraid to fire people for fear of being taken to court. So now they are stuck with employees who don’t really care about the company, who are poorly trained, and whose attitude of indifference gives customer service a bad name. This has contributed greatly to the failing economy.
Good customer service is so rare that nowadays we find ourselves praising company employees profusely just for doing their job. In other words, we are getting accustomed to employees who are not properly trained, who have no job skills, who cannot think their way out of a paper bag and who are absolutely indifferent to their customer’s needs – and we wonder why the economy is in such bad shape.
Look at the culture we have accepted as our norm. It’s pitiful. It’s disgraceful. When you buy an expensive item, you probably want something that works, a company that stands behind its warranty and a salesperson who can tell you something about the product and be reasonably correct in the information they are disseminating.
And if that’s the case, why wouldn’t you give that same level of service to your customers?
We’ve already seen how manufacturers use the concept of planned obsolescence. If your washing machine has a warranty of 3 years - we can almost be sure that it’s going to be ready for the rubbish heap in 3 years and 1 week. There was a time when a washing machine would last for ever and a day, and if you needed service, the store would send someone who was reliable and knowledgeable and capable of fixing that machine.
Customer service is the bedrock of any business whether you provide a service or a product. If you are diligent about keeping appointments, being on top of follow-ups, correcting problems immediately and having a cheerful, cooperative attitude, you can’t help but be successful, no matter what the economy.
During the Great depression of 1929, with 23% of the population unemployed and standing on bread lines in the US, there were still enterprising people who opened businesses or continued businesses that had been in operation and who made a great deal of money.
People who were willing to work hard and go above and beyond what was expected of them. People who persevered, who did not give up hope, but who forged ahead in spite of every hardship they encountered.
I worry about people being unprepared emotionally and financially for the hard times yet to come.
Of all the things that we can do to turn this economy around, good customer service seems the easiest in theory. What could be easier than having one of your employees greet people at the door with a smile and welcoming them to the store and asking how they can help them? Yet more often than not, a potential customer walks into a store, no one says hello to them, no one asks them if they need help, no one is anxious to handle their complaints and no one seems anxious to get their business.
Several years ago, I heard of a store manager of a high end department store who had a customer who had just bought an expensive outfit from the store and she had no shoes to go with it. The store manager sent her 32 pairs of shoes delivered to her home the next day and told her to take what she needed and send the rest back. I am sure that that customer will do business with that store for the rest of her life – and that store manager will not only have gained the most loyal customer and all her family and friends but he will have increased the store’s profitability just by that one act.
Great customer service doesn’t only extend to external customers, but it extends to internal customers as well – namely, the employees. The companies that stay operational through the tough times are most likely to be the companies that take good care of their employees. The common reaction with a downturn economy is to try to pare down your costs – but the unwise employer often pares down the very things that motivate employees to be loyal and to take good care of their customers.
I know of a company in the US that scouted around for really qualified employees shortly after the economy came tumbling down. The CEO said that those he hired during this time were the cream of the crop, they were out of work because their companies had downsized, and they would be very loyal for having been hired during these tough times. He knew he was going to have to put a great deal of money into the training but his rationale was that when things are slow this is the best time to do these trainings. When business is brisk there is no time to do a really good job. So his people are well trained and he is doing great business and it’s doubtful that even if the economy goes through the roof, these people will be looking elsewhere for a better job. `
There’s a luggage company in the US that stands behind their products 100%. If a piece of their luggage ever gets damaged beyond repair, they replace it free of charge.
A man had an attaché case and he put it on the kichen counter too near a pot that was cooking on the stove. The attaché case caught fire and was badly damaged. He called the company, and told them what happened. He said: I know this is my fault, I did a stupid thing- I put the attaché case too close to the pan that was on the stove… they said “ we’ll send out a new one in tomorrow’s mail. He said “no, I’m not looking for a new one, this was my fault, I just want to know how much it will cost to repair it. They said – your attaché case is fully warrantied for any kind of damage and we’ll send you out a new one in tomorrow’s mail – which they did.
This is a customer who will never buy luggage from another company. Instead of telling 1-2 people about how satisfied he was, he told everyone he could think of about the company. This man singlehandedly caused that company’s new sales to skyrocket.
He told friends and neighbours and relatives about this company – and one of those people told a friend of mine who bought all her luggage from them too – and as a result I bought all my luggage from them as well. That’s the correlation between great customer service and the economy.
So an attaché case that cost $300 - $500 probably netted the company $1/2M in new sales.
I have never seen so many businesses with so few people at the helm who understood the meaning of business. I find it incredible that in this downturn economy, businesses are not rushing to do business with you, instead they are turning it away in droves. For the past couple of months, I have been looking to rent office space for classes on a weekly basis. I need a year’s lease and nobody wants to give it to me. The most the anyone has offered has been for two months and for the stupidest of reasons that are underscored by their inability to understand economics and how their business can survive this downturn economy.
Let me give you some examples of what I’m talking about.
I went to one place and asked for a year’s lease and she said that couldn’t be done, because once a month they hold a board meeting in that room (and by the way there’s only one room that will accommodate a large enough space for classes) – and she said that first they have dinner and then they have their board meeting. So I asked her if they couldn’t have their board meeting on another night. She said, no – that’s the night we’ve been having the meeting for many years. I asked he how many people came to these board meetings – she said there are 12 of them. So I thought to myself this makes absolutely no sense. This room is supposed to generate an income and yet, business is being turned away because these 12 people would be inconvenienced by having their meeting on another night.
If I owned that building, and these were my board members, you can be sure that if they wanted to have their meeting on that night and they wanted to have dinner, I would host the meeting in my house, order in pizza and have the meeting at my place for just 12 people.
Another building had a perfectly lovely room and they would only give me 2 months – because just in case they needed it for other events that may want to come in during the year. There’s an old saying: a bird in the hand is worth two in the bush” – they turned down a year’s lease that was guaranteed income for them, just in case, in the downturn economy, someone else wanted to use the room for a different event.
Then I went to a school with the same request for a year’s lease and they turned it down simply because twice a year they give exams to their students and they needed that room for their exams. With the economy being the way it is, and the exams being given just twice a year, you would think that even if they had to give those exams on a Saturday, they would have had the business sense to give me a year’s lease. Again, a guaranteed income for them.
Let me give you another example of really poor customer service. I bought a highly specialised software programme and there’s only one technician in my entire community who is licensed to do repairs, upgrades and tutorials. His fees are much higher than anyone else’s. He doesn’t get back to you when he promises. He only gets back to you when he knows he’s going to make some more money from you.
Up to this point, he’s been riding high. In his mind, he thinks that he will continue to thrive – what he doesn’t realise is that with so many people wanting our money, if he continues with such poor customer service – people like me will throw up our hands in disgust and buy a different software programme from someone else. And this deplorable level of customer service doesn’t only hold true in my country, but in a neighbouring country as well. I am trying to buy a $500 programme and they haven’t returned my telephone calls. And the sad part about all of this is that when their business fails and they have no income, they won’t even realise that they were the ones who caused their own downfall.
The heart of an economy is based on the numbers of employed people. A country cannot survive without people buying goods. If you are out of work, you cannot afford to buy anything. If you can’t afford to buy anything, the economy crashes. So it makes sense to look at why people need to hone up on their customer service skills as a way of generating new business and retaining existing business.
Everything that we do or fail to do has a direct correlation to our income and by extension to the economy of our country and the economy of the world.
To sum up:
1. If you are the boss, examine the things you can do to generate business
2. Don’t let convenience or habit stand in the way of taking advantage of a good business opportunity.
3. If your business involves performing a service, make sure you give 100% of yourself to your customers.
4. Be on time for your appointments
5. Return phone calls promptly
6. Make sure you follow through with all your commitments
7. At the end of the service you are providing, ask your customer if they are satisfied with the level of service they have received and don’t be offended if you have to hear criticism. Take it to heart and try to do better for the next customer
8. Be courteous, be cheerful, be helpful, be knowledgeable. If you don’t know the answer, or cannot perform the service, admit it. Don’t be afraid to refer that person to someone else who may be able to help, because that customer will probably come back to you in the future, just for your honesty.
You cannot separate customer service from the bottom line. With so many people competing for business, the only ones who will survive this economic downturn will be those who know how to give excellent service.
Studies show that a typical dissatisfied customer will tell 6-10 people about the problem. A typical satisfied customer will tell 1-2 people. It costs 6x more to attract a new customer than it does to keep an old one. Of those customers who stop doing business with you 68% do so because of an attitude of indifference by the company or a specific individual. About 7-10 complaining customers will do business with you again if you resolve the complaint in their favour. If you resolve a complaint on the spot, 95% of your customers will do business with you again.
How can you afford to ignore these statistics? As a business owner you stand to lose a lot of money and perhaps even your business if you ignore these statistics. As an employee you stand to lose your job if you don’t pay attention to your customer’s needs.
In the old days, people were expected to do their job and to do it well. And if they didn’t, they were fired. Today, we’re living in litigious times. Due to the recent spate of lawsuits, companies are afraid to fire people for fear of being taken to court. So now they are stuck with employees who don’t really care about the company, who are poorly trained, and whose attitude of indifference gives customer service a bad name. This has contributed greatly to the failing economy.
Good customer service is so rare that nowadays we find ourselves praising company employees profusely just for doing their job. In other words, we are getting accustomed to employees who are not properly trained, who have no job skills, who cannot think their way out of a paper bag and who are absolutely indifferent to their customer’s needs – and we wonder why the economy is in such bad shape.
Look at the culture we have accepted as our norm. It’s pitiful. It’s disgraceful. When you buy an expensive item, you probably want something that works, a company that stands behind its warranty and a salesperson who can tell you something about the product and be reasonably correct in the information they are disseminating.
And if that’s the case, why wouldn’t you give that same level of service to your customers?
We’ve already seen how manufacturers use the concept of planned obsolescence. If your washing machine has a warranty of 3 years - we can almost be sure that it’s going to be ready for the rubbish heap in 3 years and 1 week. There was a time when a washing machine would last for ever and a day, and if you needed service, the store would send someone who was reliable and knowledgeable and capable of fixing that machine.
Customer service is the bedrock of any business whether you provide a service or a product. If you are diligent about keeping appointments, being on top of follow-ups, correcting problems immediately and having a cheerful, cooperative attitude, you can’t help but be successful, no matter what the economy.
During the Great depression of 1929, with 23% of the population unemployed and standing on bread lines in the US, there were still enterprising people who opened businesses or continued businesses that had been in operation and who made a great deal of money.
People who were willing to work hard and go above and beyond what was expected of them. People who persevered, who did not give up hope, but who forged ahead in spite of every hardship they encountered.
I worry about people being unprepared emotionally and financially for the hard times yet to come.
Of all the things that we can do to turn this economy around, good customer service seems the easiest in theory. What could be easier than having one of your employees greet people at the door with a smile and welcoming them to the store and asking how they can help them? Yet more often than not, a potential customer walks into a store, no one says hello to them, no one asks them if they need help, no one is anxious to handle their complaints and no one seems anxious to get their business.
Several years ago, I heard of a store manager of a high end department store who had a customer who had just bought an expensive outfit from the store and she had no shoes to go with it. The store manager sent her 32 pairs of shoes delivered to her home the next day and told her to take what she needed and send the rest back. I am sure that that customer will do business with that store for the rest of her life – and that store manager will not only have gained the most loyal customer and all her family and friends but he will have increased the store’s profitability just by that one act.
Great customer service doesn’t only extend to external customers, but it extends to internal customers as well – namely, the employees. The companies that stay operational through the tough times are most likely to be the companies that take good care of their employees. The common reaction with a downturn economy is to try to pare down your costs – but the unwise employer often pares down the very things that motivate employees to be loyal and to take good care of their customers.
I know of a company in the US that scouted around for really qualified employees shortly after the economy came tumbling down. The CEO said that those he hired during this time were the cream of the crop, they were out of work because their companies had downsized, and they would be very loyal for having been hired during these tough times. He knew he was going to have to put a great deal of money into the training but his rationale was that when things are slow this is the best time to do these trainings. When business is brisk there is no time to do a really good job. So his people are well trained and he is doing great business and it’s doubtful that even if the economy goes through the roof, these people will be looking elsewhere for a better job. `
There’s a luggage company in the US that stands behind their products 100%. If a piece of their luggage ever gets damaged beyond repair, they replace it free of charge.
A man had an attaché case and he put it on the kichen counter too near a pot that was cooking on the stove. The attaché case caught fire and was badly damaged. He called the company, and told them what happened. He said: I know this is my fault, I did a stupid thing- I put the attaché case too close to the pan that was on the stove… they said “ we’ll send out a new one in tomorrow’s mail. He said “no, I’m not looking for a new one, this was my fault, I just want to know how much it will cost to repair it. They said – your attaché case is fully warrantied for any kind of damage and we’ll send you out a new one in tomorrow’s mail – which they did.
This is a customer who will never buy luggage from another company. Instead of telling 1-2 people about how satisfied he was, he told everyone he could think of about the company. This man singlehandedly caused that company’s new sales to skyrocket.
He told friends and neighbours and relatives about this company – and one of those people told a friend of mine who bought all her luggage from them too – and as a result I bought all my luggage from them as well. That’s the correlation between great customer service and the economy.
So an attaché case that cost $300 - $500 probably netted the company $1/2M in new sales.
I have never seen so many businesses with so few people at the helm who understood the meaning of business. I find it incredible that in this downturn economy, businesses are not rushing to do business with you, instead they are turning it away in droves. For the past couple of months, I have been looking to rent office space for classes on a weekly basis. I need a year’s lease and nobody wants to give it to me. The most the anyone has offered has been for two months and for the stupidest of reasons that are underscored by their inability to understand economics and how their business can survive this downturn economy.
Let me give you some examples of what I’m talking about.
I went to one place and asked for a year’s lease and she said that couldn’t be done, because once a month they hold a board meeting in that room (and by the way there’s only one room that will accommodate a large enough space for classes) – and she said that first they have dinner and then they have their board meeting. So I asked her if they couldn’t have their board meeting on another night. She said, no – that’s the night we’ve been having the meeting for many years. I asked he how many people came to these board meetings – she said there are 12 of them. So I thought to myself this makes absolutely no sense. This room is supposed to generate an income and yet, business is being turned away because these 12 people would be inconvenienced by having their meeting on another night.
If I owned that building, and these were my board members, you can be sure that if they wanted to have their meeting on that night and they wanted to have dinner, I would host the meeting in my house, order in pizza and have the meeting at my place for just 12 people.
Another building had a perfectly lovely room and they would only give me 2 months – because just in case they needed it for other events that may want to come in during the year. There’s an old saying: a bird in the hand is worth two in the bush” – they turned down a year’s lease that was guaranteed income for them, just in case, in the downturn economy, someone else wanted to use the room for a different event.
Then I went to a school with the same request for a year’s lease and they turned it down simply because twice a year they give exams to their students and they needed that room for their exams. With the economy being the way it is, and the exams being given just twice a year, you would think that even if they had to give those exams on a Saturday, they would have had the business sense to give me a year’s lease. Again, a guaranteed income for them.
Let me give you another example of really poor customer service. I bought a highly specialised software programme and there’s only one technician in my entire community who is licensed to do repairs, upgrades and tutorials. His fees are much higher than anyone else’s. He doesn’t get back to you when he promises. He only gets back to you when he knows he’s going to make some more money from you.
Up to this point, he’s been riding high. In his mind, he thinks that he will continue to thrive – what he doesn’t realise is that with so many people wanting our money, if he continues with such poor customer service – people like me will throw up our hands in disgust and buy a different software programme from someone else. And this deplorable level of customer service doesn’t only hold true in my country, but in a neighbouring country as well. I am trying to buy a $500 programme and they haven’t returned my telephone calls. And the sad part about all of this is that when their business fails and they have no income, they won’t even realise that they were the ones who caused their own downfall.
The heart of an economy is based on the numbers of employed people. A country cannot survive without people buying goods. If you are out of work, you cannot afford to buy anything. If you can’t afford to buy anything, the economy crashes. So it makes sense to look at why people need to hone up on their customer service skills as a way of generating new business and retaining existing business.
Everything that we do or fail to do has a direct correlation to our income and by extension to the economy of our country and the economy of the world.
To sum up:
1. If you are the boss, examine the things you can do to generate business
2. Don’t let convenience or habit stand in the way of taking advantage of a good business opportunity.
3. If your business involves performing a service, make sure you give 100% of yourself to your customers.
4. Be on time for your appointments
5. Return phone calls promptly
6. Make sure you follow through with all your commitments
7. At the end of the service you are providing, ask your customer if they are satisfied with the level of service they have received and don’t be offended if you have to hear criticism. Take it to heart and try to do better for the next customer
8. Be courteous, be cheerful, be helpful, be knowledgeable. If you don’t know the answer, or cannot perform the service, admit it. Don’t be afraid to refer that person to someone else who may be able to help, because that customer will probably come back to you in the future, just for your honesty.
Saturday, August 22, 2009
Silver - to buy or not to buy?
Everything that uses electricity or electronics requires silver, almost. Think about it: your cell phone, your laptop, your CD player, plasma screen, refrigerator, washing machine . . . everything you can think of that uses electrical current or is an electronic item, like an iPod, uses silver to some level.
So even though it’s a miniscule amount, if you’ve got a billion people seeking these type of gizmos, gadgets, and just raw power or something as basic as a washing machine, that puts an upward pressure on the silver price from an industrial perspective.
There is much talk about China at the moment being a possible huge investor in silver. How much silver investment demand there will be and how it will catch on, no one knows at this point. Many pundits suggest that it will catch on and I am inclined to agree with them. People have a survival instinct and when there is panic and chaos, especially in financial markets, they seek anything that they perceive will preserve their wealth or protect them. Silver promises to do just that.
At over USD$900 per ounce at present, gold is too expensive for many people therefore silver is a very attractive and affordable option. We do not have a massive supply of silver worldwide and we have a much larger base of people willing to get into the silver market than ever before. It is quite possible that silver will reach in excess of USD$50 per ounce.
So for those of you who are afraid of having all your money in banking institutions and who either do not have the funds to buy gold at all, or who can buy only a little, then silver is a wonderful option. It is inexpensive, but one of the drawbacks is that it is very bulky and difficult to store. You may have to consider having it stored by a company overseas – there are several online and I suggest you check them out. www.goldmoney.com and www.bullionvault.com are a couple of options for you to start out.
For a relatively small amount of money, you can have some physical coins that will give you protection should the whole system collapse.
So even though it’s a miniscule amount, if you’ve got a billion people seeking these type of gizmos, gadgets, and just raw power or something as basic as a washing machine, that puts an upward pressure on the silver price from an industrial perspective.
There is much talk about China at the moment being a possible huge investor in silver. How much silver investment demand there will be and how it will catch on, no one knows at this point. Many pundits suggest that it will catch on and I am inclined to agree with them. People have a survival instinct and when there is panic and chaos, especially in financial markets, they seek anything that they perceive will preserve their wealth or protect them. Silver promises to do just that.
At over USD$900 per ounce at present, gold is too expensive for many people therefore silver is a very attractive and affordable option. We do not have a massive supply of silver worldwide and we have a much larger base of people willing to get into the silver market than ever before. It is quite possible that silver will reach in excess of USD$50 per ounce.
So for those of you who are afraid of having all your money in banking institutions and who either do not have the funds to buy gold at all, or who can buy only a little, then silver is a wonderful option. It is inexpensive, but one of the drawbacks is that it is very bulky and difficult to store. You may have to consider having it stored by a company overseas – there are several online and I suggest you check them out. www.goldmoney.com and www.bullionvault.com are a couple of options for you to start out.
For a relatively small amount of money, you can have some physical coins that will give you protection should the whole system collapse.
Sunday, August 16, 2009
More on Written Agreements and Protecting your Assets
Contracts and agreements e.g. rental agreement, mortgage agreement, loan from family member or friend, credit card agreement, hire purchase agreement etc. affect most of us at some stage in our lives. and what you should be looking for to protect yourself and your assets.
Whether we are making these contracts and agreements with people we love and trust or whether we are making them with strangers. There are some simple rules of thumb that we should all be looking at as they apply to most of us.
Historically, 100-200 years ago, most countries did not recognise women’s rights to own property. They could not get a mortgage or credit without their husband’s permission. They themselves were treated as chattels.
If they wanted to know about money, they were told not to worry their pretty little heads – so it became the man’s job to worry about money and the woman’s job to take care of his personal needs and to be the heart of the house. He worked, he provided for their needs, she took care of the children, the household chores and her husband’s needs. Consequently when a husband died or divorced her or just disappeared, she was left not knowing how to balance a chequebook, not knowing what her mortgage rates were, or how responsible she was for paying that mortgage down. She had no knowledge of insurance and was often left without insurance coverage for herself and her family. As far as her car was concerned, she knew how to put the key in the ignition and get to the nearest service station.
Nowadays, women are in top positions in corporations but many of them still have their husband’s making the major decisions on things like insurance, mortgage rates, investments, medical coverage and pension plans.
Historically, when a woman gets into a relationship, she’s always given her husband dominion over her assets. She could come into a marriage with a house completely in her name and once she gets married and he wants to be put on the title to it, she doesn’t question it.
Also, historically, a woman takes the softer view. I love him, everything we have is ours. We share and share alike. I should be putting the house in both of our names. WRONG, wrong, wrong.
If he wants to be put on the title, or you want him to be put on the title, get 3 evaluations of the house and let him give you his share of the money for that house. After all if you are going into a business partnership and someone wants to buy into your business, you would have your business valued at current prices, and that partner would have to buy in cash at the current value. A house is no different.
Once he is on that title, he can do anything with that house, he can take out loans against it, and he can walk out on you, or he can mortgage it to the hilt and die leaving you with debt.
The same can be true of a man who owns property, but men usually cover themselves with pre-nuptial agreements. Women, historically have not been that smart. They have got smarter in recent years, but because their emotions are engaged so quickly and so deeply, they often have to be reminded to protect their assets.
The same thing holds true if you own your own house and your spouse wants you to sell it so that you can move into a larger place – once again, that partner should be compensating you with the value of his or her share of the house before you sell it. Because if the marriage falls apart, either way you would lose out because when it comes to a division of assets – you only own half of the new house and none of the house that you had in your own name before the partnership.
For example, I knew someone who had her own home that she had bought with her own money and had been living there for a number of years and that house was almost paid off. Then she got married. The new husband moved in. A few months later, he decided he didn’t want to live in that house. He wanted them to sell it and live in another house. After their divorce 15 years later, all she was able to get was half of the new house and nothing of the house that she had originally.
When you are dealing with monies, even if you are in a deep relationship, with a family member, a friendship, your spouse and you trust the other person deeply. You have had a lot of experience over the years and you think to yourself that you don’t need a written agreement – think again. You can never tell if or when the other person is going to back off and leave you with the debts and responsibilities or if the other person is going to sell off their half of the partnership leaving you unprotected.
On a professional level, I have a client who is having a house built, and she has known her builder for many years and he’s done work on other houses of hers. He has given her a quote for the work and said that it will not be above $120,000 for his labour costs – but she has decided that she doesn’t need a written agreement. I advised her that no matter how well she knows her builder, she does need a written agreement stating that his costs will not be above $120K. What happens if he is injured and he hasn’t been paying his public liability insurance? What if he goes into bankruptcy and just leaves the job halfway done and leaves the country?
If you have a quote from a builder with materials included, their suppliers could go out of business, the builders costs could go up and your costs could go up accordingly. If you want to protect yourself on materials, open up an account at a builder’s merchant so that you can buy the materials yourself and you can get the most competitive prices. That way, when your builder is quoting you prices for labour, you know you are just paying for labour and you can negotiate his labour costs, especially now when construction work is in such short supply.
So as you can see, on a personal and a professional level, you always need a written agreement.
You can be in a romantic relationship or a marriage and all of a sudden your partner goes to the bank and draws all your money and you are left with all the debts. And no matter how much you love someone, where there is money involved, make sure everything is spelled out really well. Make sure your lawyer has covered everything and you are not leaving any loopholes.
For example, I knew someone who had been married for 25 years and their only daughter was getting married. The wedding was very expensive and as soon as they got home from their daughter’s wedding, she started preparing for bed. She sees her husband has a suitcase and he is emptying his drawers out into the suitcase. What are you doing? I am packing, I’m leaving you. I just wanted to wait until our daughter got married and was out of the house so I could leave you. I have found someone else. After 25 years of marriage, he just walked out and left her with a pile of debts.
If you being asked to sign anything e.g. a husband of 30 years – make sure a lawyer checks the paperwork. Ensure that someone can explain it to you and don’t be led like a lamb to the slaughter. In the end that partner may leave you, divorce you or die and may leave you with a lot of debt. You need to know what you are going to be responsible for.
Another important point to remember is that if anyone wants you to sign papers quickly, your answer has to be NO. Don’t ever allow yourself to be rushed into a financial agreement. No matter how good the deal might sound, you need time to assess whether it is right for you.
Whether we are making these contracts and agreements with people we love and trust or whether we are making them with strangers. There are some simple rules of thumb that we should all be looking at as they apply to most of us.
Historically, 100-200 years ago, most countries did not recognise women’s rights to own property. They could not get a mortgage or credit without their husband’s permission. They themselves were treated as chattels.
If they wanted to know about money, they were told not to worry their pretty little heads – so it became the man’s job to worry about money and the woman’s job to take care of his personal needs and to be the heart of the house. He worked, he provided for their needs, she took care of the children, the household chores and her husband’s needs. Consequently when a husband died or divorced her or just disappeared, she was left not knowing how to balance a chequebook, not knowing what her mortgage rates were, or how responsible she was for paying that mortgage down. She had no knowledge of insurance and was often left without insurance coverage for herself and her family. As far as her car was concerned, she knew how to put the key in the ignition and get to the nearest service station.
Nowadays, women are in top positions in corporations but many of them still have their husband’s making the major decisions on things like insurance, mortgage rates, investments, medical coverage and pension plans.
Historically, when a woman gets into a relationship, she’s always given her husband dominion over her assets. She could come into a marriage with a house completely in her name and once she gets married and he wants to be put on the title to it, she doesn’t question it.
Also, historically, a woman takes the softer view. I love him, everything we have is ours. We share and share alike. I should be putting the house in both of our names. WRONG, wrong, wrong.
If he wants to be put on the title, or you want him to be put on the title, get 3 evaluations of the house and let him give you his share of the money for that house. After all if you are going into a business partnership and someone wants to buy into your business, you would have your business valued at current prices, and that partner would have to buy in cash at the current value. A house is no different.
Once he is on that title, he can do anything with that house, he can take out loans against it, and he can walk out on you, or he can mortgage it to the hilt and die leaving you with debt.
The same can be true of a man who owns property, but men usually cover themselves with pre-nuptial agreements. Women, historically have not been that smart. They have got smarter in recent years, but because their emotions are engaged so quickly and so deeply, they often have to be reminded to protect their assets.
The same thing holds true if you own your own house and your spouse wants you to sell it so that you can move into a larger place – once again, that partner should be compensating you with the value of his or her share of the house before you sell it. Because if the marriage falls apart, either way you would lose out because when it comes to a division of assets – you only own half of the new house and none of the house that you had in your own name before the partnership.
For example, I knew someone who had her own home that she had bought with her own money and had been living there for a number of years and that house was almost paid off. Then she got married. The new husband moved in. A few months later, he decided he didn’t want to live in that house. He wanted them to sell it and live in another house. After their divorce 15 years later, all she was able to get was half of the new house and nothing of the house that she had originally.
When you are dealing with monies, even if you are in a deep relationship, with a family member, a friendship, your spouse and you trust the other person deeply. You have had a lot of experience over the years and you think to yourself that you don’t need a written agreement – think again. You can never tell if or when the other person is going to back off and leave you with the debts and responsibilities or if the other person is going to sell off their half of the partnership leaving you unprotected.
On a professional level, I have a client who is having a house built, and she has known her builder for many years and he’s done work on other houses of hers. He has given her a quote for the work and said that it will not be above $120,000 for his labour costs – but she has decided that she doesn’t need a written agreement. I advised her that no matter how well she knows her builder, she does need a written agreement stating that his costs will not be above $120K. What happens if he is injured and he hasn’t been paying his public liability insurance? What if he goes into bankruptcy and just leaves the job halfway done and leaves the country?
If you have a quote from a builder with materials included, their suppliers could go out of business, the builders costs could go up and your costs could go up accordingly. If you want to protect yourself on materials, open up an account at a builder’s merchant so that you can buy the materials yourself and you can get the most competitive prices. That way, when your builder is quoting you prices for labour, you know you are just paying for labour and you can negotiate his labour costs, especially now when construction work is in such short supply.
So as you can see, on a personal and a professional level, you always need a written agreement.
You can be in a romantic relationship or a marriage and all of a sudden your partner goes to the bank and draws all your money and you are left with all the debts. And no matter how much you love someone, where there is money involved, make sure everything is spelled out really well. Make sure your lawyer has covered everything and you are not leaving any loopholes.
For example, I knew someone who had been married for 25 years and their only daughter was getting married. The wedding was very expensive and as soon as they got home from their daughter’s wedding, she started preparing for bed. She sees her husband has a suitcase and he is emptying his drawers out into the suitcase. What are you doing? I am packing, I’m leaving you. I just wanted to wait until our daughter got married and was out of the house so I could leave you. I have found someone else. After 25 years of marriage, he just walked out and left her with a pile of debts.
If you being asked to sign anything e.g. a husband of 30 years – make sure a lawyer checks the paperwork. Ensure that someone can explain it to you and don’t be led like a lamb to the slaughter. In the end that partner may leave you, divorce you or die and may leave you with a lot of debt. You need to know what you are going to be responsible for.
Another important point to remember is that if anyone wants you to sign papers quickly, your answer has to be NO. Don’t ever allow yourself to be rushed into a financial agreement. No matter how good the deal might sound, you need time to assess whether it is right for you.
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