Welcome back to the Leave it to the Pros series, where we ask the country’s top financial experts important questions about your personal finances. We’re up to round six, sitting down today with Lynnette Khalfani-Cox. Co-founder of the free financial advice blog, AskTheMoneyCoach.com, Lynnette also heads up MyMoneyCircles.com, a free personal finance boot camp that launches this month.
Q: Hi, Lynnette. Thanks so much for being here. You sound like a busy woman. Walk us through some of your career highlights.
A: As a Money Coach, I teach people about personal finances and how to get financially fit. My specialty areas include credit and debt, including credit card debt, student loan debt, mortgages, and improving your credit score. At a broader level, I also help people tackle topics such as how to reach their financial goals — such as buying a home, saving money for their kids’ college education, funding a comfortable retirement or investing wisely.
I’m a financial news journalist by background and training. After earning my Master of Arts degree in Journalism from USC, I began working for the Associated Press. After that, I worked (simultaneously) for two news organizations in Philly: I was a correspondent by day for the Philadelphia Inquirer and a writer/assistant producer by night for the FOX 10 O’Clock News. Then, in 1994, I started working for Dow Jones as a writer covering Wall Street for Dow Jones Newswires. I stayed with Dow Jones for nearly 10 years, working in different capacities. In 2003, I struck out on my own and launched my business as a Money Coach. My work now entails three primary areas: seminars and workshops; writing; and media work.
I really love what I do and feel like I’m accomplishing my professional mission in life – which is to teach others how to handle their finances well. That’s why I’m super excited about the launch of MyMoneyCircles.com. For this new initiative, I’ve partnered with a team of financial experts and we’ll be teaching boot camp participants how to do everything from getting out of debt to saving more money to protecting their family and their assets.
The boot camp was designed to help participants step-by-step through their financial challenges, teaching them what they need to know and giving them practical tools and advice to take action — and not just worry or procrastinate about money matters. There’s also an online support community at MyMoneyCircles.com, where people can anonymously share their financial triumphs and setbacks, as well as connect with other people who share their financial goals.
Q: Wow! You’re certainly not one to sit still. You’ve written several personal finance books. What inspired you to write these books?
A: So far, I’ve written six personal finance books for adults and I’ve co-authored a four-book money management series for kids, called The Millionaire Kids Club. I’m really proud that one of my books, Zero Debt: The Ultimate Guide to Financial Freedom, is a self-published work that actually became a New York Times best-seller. I wrote Zero Debt after I personally got out of $100,000 in credit card debt in just three years. I was in debt back in 2001. Afterward, I figured, if I could get out of debt with the huge financial burden I had, so could others. I wrote Zero Debt in 2004 and published a second edition of it in 2010. It needed to be updated because, unfortunately, the debt problem in America has only gotten worse in recent years.
Q: You had $100,000 in debt?! How were you able to dig yourself out of this hole?
I got into debt mainly because of over-spending and poor money management. I got out of it through a combination of methods that I discuss in Zero Debt. But to highlight a few, I’d say:
To pay off my credit card bills, I used the exact same strategies I outlined in my book – getting a budget together, cutting back on frivolous spending (like vacations and dinners out), refinancing my auto loan, negotiating with my creditors for lower interest rates, doubling and tripling up on the minimum payments I was making, and using “windfalls” or “extra” money, like income tax checks and year-end bonuses from my job to pay off debt, etc.
I also made some tough choices, like taking my two older kids out of private school and putting them in a less expensive private school. (They’re actually now in public school and doing just great). After nearly three years of all this, I’d paid off $70,000 in credit card debt. Then in early 2004, my ex-husband and I sold some land we owned and used $30,000 to pay off the last $30,000 of credit card debt we owed.
Q: Very impressive. Any plans for another book?
[Free Resource: Check your free credit report and score]A: My latest book is called Perfect Credit: 7 Steps to a Great Credit Rating. It’s designed to teach people how to manage credit wisely and improve their credit scores. Having a strong credit profile is so enormously important today because your credit determines everything from your ability to rent an apartment or buy a home to the rates you’ll pay for loans and insurance. In 2012, I do plan to write another book, most likely focused on women and finances. I’m always working on good ideas based on trends I see and the feedback I get from my readers and fans.
Q: We’ll keep an eye out for that one! One of your books helps college grads go from student loans to financial freedom. Can you share with our readers some ways for young people to do this?
A: In addition to having had credit card debt in the past, I also had $40,000 in student loans when I finished my graduate studies. So I also had a huge personal incentive – as well as a professional interest – in writing Zero Debt for College Grads: From Student Loans to Financial Freedom. This book was actually a sequel to Zero Debt, which mainly focused on credit card debt. In Zero Debt for College Grads, I share a boatload of strategies that people can use to eliminate student loans. But to offer a few tips, I’d suggest:
- Pick the shortest loan repayment program you can afford.
- Ask your current or future employer to help you eliminate your student loan.
- Get the federal government to pay off up to $60,000 of your college debt via the Federal Student Loan Repayment Program that’s administered through the Office of Personnel Management.
- Request a deferment, forbearance or loan cancellation during periods of economic hardship.
- Use volunteer activities or certain work to qualify for loan forgiveness or cancellation.
Q: What are some of the most common mistakes Americans make with regard to their debt?
A: Some of the most common mistakes people make with regard to their debt are to:
- Keep spending recklessly (under the notion “I’m already in thousands of dollars worth of debt, what difference is $500 more?”).
- Use a home equity loan to pay off credit card debt when they really have a deeper debt problem that needs to be fixed (like they’re a gambler or a shopaholic).
- Borrow money haphazardly from family and friends (if those loans go sour, you risk damaging or destroying the relationship).
- Ignore the warning signs of debt (some people think that as long as they’re making minimum payments or as long as they have a job, everything is OK. I know I did – even when I had a ton of debt. It’s important to face reality, and to recognize the red flags and warning signs that you have too much debt. Some of those warning signs are things like: you’re arguing with your spouse about debt, you get turned down for credit, you can only afford minimum payments, you feel stress about your debts/bills, or your credit score is lower than it should be because of your debt load.
Q: What is the most important piece of financial advice you’ve ever received?
A: My mother told me – insisted, actually – that I start saving money when I was a teenager and had my first job. I did it only because I had to, but I never stuck to it on my own as a young adult. And oh, how I wish I had listened to her! It took me a really long time to see the value of saving early and often. It can do wonders for your personal finances.
Q: If readers could do one thing to improve their financial lives, what would you tell them to do?
A: I’d say planning for a “what if” scenario is probably the single-most important thing you can do to improve your financial life. Too often, we make plans under the (misguided) assumption that everything will go according to our wants, needs and desires. But life is rarely like that.
You always need to have a back-up plan, or a Financial Plan B. And creating a Plan B begins with asking yourself tough questions like “What if I lost my job?” or “What if I got divorced?” Then you can start thinking about the preventive steps you’d need to take — or at least the actions you could take now that could minimize the financial impact of unforeseen or unwanted circumstances.
You can learn more about Lynnette Khalfani-Cox, The Money Coach, at AskTheMoneyCoach.com.