You’d never guess that personal finance expert Lynette Khalfani-Cox once shouldered six-figures in credit card debt. Dubbed as The Money Coach®, she has doled out financial advice across 15 books including her latest Bounce Back: The Ultimate Guide to Financial Resilience, and offered her effective debt management tips in TV segments on Oprah, Dr. Phil, The Dr. Oz Show, The Steve Harvey Show, Good Morning America, and The TODAY Show among many others.
But before Khalfani-Cox was leading others to debt freedom, she was in a financial prison of her own making.
“When I was in my early 30s I was an over-spender,” she tells ESSENCE. “And frankly, I was a poor money manager. I was not using credit and debt wisely.” Although she earned six figures, she allowed a “keeping up with the Joneses” mindset to lead her into a hole that was almost the value of her yearly earnings. Fortunately, she was able to implement some action steps that saved her wallet without drastically changing her lifestyle.
- Try To First Uncover And Then Understand The Emotional Causes Behind Your Over-Spending
Anxiety is typically linked to feeling like you’ve lost control of life’s outcomes, a 2014 report by The University of Michigan’s Ross School of Business found. The findings suggest that buying new things can give people the illusion of being more in control. But Khalfani-Cox warns against falling into this trap.
“It’s interesting that there are so many emotional and psychological components that go into our finances and that absolutely leads folks into debt, especially Black women. In Bounce Back, I interviewed a Black financial therapist with a client-base of all Black women who are having various challenges. Debt is among the top of the list because it’s usually linked to an emotional root. Often times, Black women aren’t able to give themselves the time and space to take care of their emotional needs, so they find a quick remedy in consumerism.”
Research from Nobel Prize-winning economist, Daniel Kahneman showed that 80% of all of most financial choices are emotional.
Khalfani-Cox advises practicing self care, reaching out for connection, and understanding how to ask for help from those around before pulling your card out your wallet.
“We say a closed mouth doesn’t get fed that kind of things, but there’s also a huge amount of shame, especially in the Black community, when it comes to our finances and the ways in which we’re not ‘as far along as we think that we should be’.”
2. Avoid Paying Credit Card Minimums At All Costs
Although most credit cards’ allow you to, paying only the minimum causes quite a bit of damage in the long run, and can extend the term of your debt.
“I really want people to understand that credit card companies typically only ask you to pay 1% to 2% of the outstanding balance as your minimum payment {as a way to keep you in debt}.”
Khalfani-Cox goes on to call the pay back method a financial trap.
“When I suggest to people that you make double or triple the minimum payments, I’m fully aware that not everybody has the cash flow to do that,” she tells ESSENCE. “What I suggest is that you adopt a couple of strategies.”
- Pay something. “I don’t care what it is,” Khalfani-Cox said. “If your minimum payments are $250 a month and you can’t afford to make $500 or $750 a month, can you pay an extra 10% per month? Can you pay an extra $25? Can you pay an extra $50? Whatever you do, it’ll be better than just making minimum payments. Don’t let that be a barrier or an obstacle and hold you back.”
- Selling items. “You can start jump start debt payback by offloading some things you don’t need anymore,” she advises. “I’m a huge proponent of getting rid of clutter in our lives. And the new year is a great time to do this because a lot of us are looking for a financial reset. We talk about spring cleaning. You should be about spring financial cleaning.
- Tax refund. “If you aren’t in the space to sell anything you can use your income tax refund check to pay down that interest-bearing credit card, especially if you’re not expecting any other financial windfalls anytime soon. The IRS says that the average tax refund check is about $3,000. More than 75% of Americans do typically receive a tax refund check. That’s a more feasible and kind of a less painful way to do it because it’s not coming out of your regular cash flow. It doesn’t hurt your existing ability to be able to pay your bills and your ongoing obligations.
3. Lastly, Evaluate The People Around You
Getting out of debt can feel incredibly isolating, but you don’t have to go at it alone. But Khalfani-Cox says you should be shrewdly discerning when creating a community of support for the journey to financial freedom.
“I’m always telling people that you should consistently evaluate the people, places, and products in your life, especially if you’re having financial difficulties,” she tells ESSENCE. “These elements will tell you a lot about whether or not you’re going to be able to level up remain stagnant when attempting to achieve your financial goals. These influences are especially important in your social circle. They say you’re the average of the five people that you spend the most time with.”
This mean in real life, and even the things you pay attention on social media.
“With the advent of social media and literal influencers being a part of that whole conversation, our thinking is affected in far greater way than it had been in the past. Doing a real life and digital cleanse may be necessary.”
For more tips, read Khalfani-Cox’s latest book Bounce Back: The Ultimate Guide to Financial Resilience.