Let’s face it, eight long years of the Bush Administration has left nothing short of a nation in disrepair and economic turmoil. Given the grim state of fiscal affairs, there couldn’t better time to seek counsel from financial expert Lynnette Khalfani-Cox, The Money Coach. The NY Times bestselling author and noted TV & radio guest discusses her journey towards financial freedom and shares invaluable financial expertise from the most basic budgeting tips to making that first million.
Clutch: Describe how you became Lynnette Khalfani-Cox, The Money Coach.
Lynnette: After I’d written my first book called “Investing in Success”, I met Earl Cox (little did I know at the time that he would become my future husband). He encouraged me to write a book about debt, and how people can get out of it. He suggested that it would be a best seller, so I took his advice and wrote my second book called “Zero Debt” which met with much success – as he predicted. While writing and promoting that book, I started to think of how I could promote my overall brand as a personal finance expert. I wanted a way to quickly convey that I was not your average financial advisor. My husband, sister (who’s also my Media Strategist) and I came up with the name “The Money Coach” because I basically teach people how to become financially fit.
Clutch: What was the worst financial mistake you’ve ever made?
Lynnette: No question, getting into a massive amount of debt was my biggest financial mistake ever. In 2001 I had $100,000 credit card debt alone. Fortunately I was able to pay it off in 3 years and I never missed a single payment. It was a very painful process and an expensive lesson to learn.
Clutch: How did you make the transition from being debt-ridden to becoming a bona fide financial expert?
Lynnette: Not only was I financially irresponsible, I made huge mistakes in regards to my credit – even when I made great salaries. I’ve been blessed however, as a business news journalist and a financial news journalist, I had an opportunity to interview some of the best and brightest minds on Wall Street. I got to learn a lot and distill their wisdom.
If you stick to a set of tried-and-true principles like “don’t spend more than you earn,” everyone can get ahead financially and build wealth. I saw that I didn’t have to be a Wall Street genius to get this down and I had to be ready to implement [these principles]. My desire to spend hasn’t gone away but now I recognize it and check myself.
Clutch: With the rise in the cost of living, it’s becoming almost impossible for folks to live debt free, let alone build wealth. What is your financial advice for people who have families or are in the family planning phase in this economic climate?
Lynnette: Number one, start planning as early as possible. It’s never too early to start laying the foundation for your financial future. My advice is to save as much as you can and don’t be ashamed or afraid to get started if you can only put away a little at time because those little chunks of change can really add up. Second, You’ve got to guard your credit rating like never before. None of that co-signing for your family members or letting people use your social security number. Those days are over with because it’s way too tough to get ahead as it is.
Clutch: What seems to be women’s biggest source of debt these days?
Lynnette: Over-shopping! We’ve all amassed different types of debt, whether it’s mortgage debt, student loan debt or even credit card debt. But for the most part, I see a lot of women that go into debt because they’re over-spending and using their credit cards way too much. Avoid trying to live what I call the “bling bling” lifestyle and guard against that temptation to “keep up with the Joneses.”
Clutch: What’s one thing Black women should do to secure our financial future?
Lynnette: Consider themselves first, which is really hard for a lot of Black women because we often sacrifice so much for other people. In many cases we put ourselves last, if at all on the list. You shouldn’t just sacrifice your own retirement just because you want your kids to have the very best of everything, or because you want to spoil your honey. We think it’s being selfish to consider ourselves first but you have to think about what the airline stewardess says before the plane takes off: If something goes wrong with this plane, put on you air mask first, then help the person to your right or left. What help can you be if you are falling apart yourself? My advice is to do your best to sure up your own financial situation.
Clutch: Given the current state of the economy, what advice can you give to our readers in terms of wise spending, and building wealth?
Lynnette: We’re all paying more for everything from health care to food costs. It’s definitely taking a toll on average working families. But I must say that I’ve never met a person who couldn’t pare back their budget if they truly evaluated their necessities versus their luxuries. Some people say, “I need my cable TV”. I don’t like to see people deprived, so I tell them to build a little freedom and fun into their budget. You should spend your money on things that you like, things that give you joy and things that give you value. If you ask 99 people out of 100 about their budgets, they’ll always tell you what they have to spend money on like: “I have to pay my rent or my mortgage,” but they very rarely say, “I really enjoy travel so I’ve allowed for x percent for a travel budget.”
People would do themselves a service to work that into their budget because this way they can avoid overspending in other areas. Many times when people binge spend it’s because they feel deprived. I just tell people to live by two rules in creating a budget:
1. You should build in those things you get value out of and enjoy.
2. You should not spend more than you earn.
Clutch: What are the most important factors to consider when building financial prosperity?
Lynnette: Diversification is extremely important. People mistakenly think there’s one pathway to wealth but in reality there are many. In my book, “The Money Coach’s Guide to Your First Million,” I talk about overcoming debt, building wealth and explain how anyone could become a millionaire and build wealth in a way that is attainable regardless of your income, background, financial sophistication, etc. There are many ways to attain wealth, but the fastest way to build wealth is to use a multitude of strategies all at once. In my case I used real estate, entrepreneurship and smart financial planning. Don’t be locked into the idea of just using one means. You have to do a lot of things right and a lot of things well, but the good news is that it’s not terribly complicated to implement in terms of strategies.
Clutch: The housing crisis has had an adverse affect on so many Americans. Not only have many people have lost their homes through foreclosure, but it’s becoming more difficult for individuals to qualify for home loans. What is your advice to those who are threatened with foreclosure?
Lynnette: First off, for those who are facing the threat of foreclosure, as painful as it might be, you’ve got to pick up the phone and call your lender. Believe it or not, more than 50% of all people who go through foreclosure and lose their homes never once called their lender. That’s a huge mistake. A lot of people who could receive help if they had reached out for it. The bank could’ve done a forbearance or loan modification. Also reach out for help from independent resources such as the National Foundation for Debt Management, which is a phenomenal group that helps people with all types of issues – homeowners and consumers alike.
For those who are thinking about buying a home, I say get ready to pounce! Now is a great time to buy a house or prepare yourself for a variety of reasons. Firstly, home prices have come down dramatically. For people who were previously priced out of the market, wherever you might be, chances are you can get a much better deal on the price of a house. Secondly, a lot of new federal legislation is advantageous. There’s a new $7500 tax credit that’s available to first time homebuyers. There’s also a relatively low interest rate environment that’s less than 7%.
Clutch: Do you think the economy will boost if Obama enters the White House?
Lynnette: I have 100% confidence and certainty that the economy will fare much better under President Obama than it would under McCain. The reality is for whom ever becomes president; he will have a difficult task with all the financial turmoil we’ve been seeing. This 700 billion dollar bailout will add to our national deficit which is already above 10 trillion dollars. The government has to borrow to finance our operations. This means certain programs won’t be able to be implemented under Obama, or any president for that matter. There are certain services and initiatives that may have to be scaled back.
Clutch: So many of our readers are saddled with ominous student debt. What recommendations can you give in regards to managing, and ultimately paying off student loan debt?
Lynnette: I wrote a book about this too called “Zero Debt For College Grads: From Student Loans To Financial Freedom,” that outlines many ideas for how to manage debt, pay it off quickly and in some cases how to get others to pay it off for you. The first bit of advice for people who are in school or are planning to attend seek out 5 alternative sources of financing before you turn to loans at all. Those would be scholarships grants, paid internships, work-study and family resources. You should spend 2 weeks where you do nothing but apply for scholarships like crazy. The pay off will be huge.
If you do have to get loans, always without exception get federal loans first before you turn to the private loan market. Federal loans are less costly and have lower interest rates than private loans. Private loans are averaging at 10%, federal around 6 percent. Federal loans also have better lean forgiveness features and forbearance options than do private loans.
Clutch: What you suggest may seem intimidating, maybe even overwhelming to some. What can you suggest to help folks get past this hurdle and stay on course when improving their financial situation?
Lynnette: Everybody’s motivated by something different. If the idea of getting out of debt means freedom from harassment from creditors, then visualize that. However, some people need to hit rock bottom or have transition in life like divorce or having a baby. I would say to draw upon what motivates you most intensely.
Clutch: Before we know it, the holidays will be here. Can you provide some tips as to how we can spend responsibly?
Lynnette: To avoid holiday debt remember that the people who love you most are not going to be judging you based on whether you buy them the $25 sweater versus the $250 dollar sweater. In addition, people should question themselves as to why they go over board and spend unwisely.
Spend more cash – try to leave the credit card at home. Take a budget with you while you holiday shop to help keep you in line. Even take a buddy, a person who knows your situation, who’s going to help try to keep you honest.
For more information on Lynnette Khalfani-Cox and financial tips please visit www.themoneycoach.net.