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Lynnette Khalfani-Cox on Having More Money
Lynnette Khalfani-Cox is a personal finance expert and the author of multiple books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom and most recently, The Money Coach’s Guide to Your First Million. Known as “The Money Coach,” Khalfani-Cox is a frequent guest on national television and radio programs, including “Oprah” and “Dr. Phil.” On the topic of choosing to have more money, Khalfani-Cox speaks from experience: She personally paid off $140,000 in credit card debt and student loans before becoming a self-made millionaire. Khalfani-Cox shares some of her thoughts on getting through the first 30 days of having more money.
Is achieving financial success just a matter of following practical steps, or is it more about your mindset?
I think that long-term success is definitely predicated on your willingness to have a game plan and execute it, but also to have a vision for yourself and follow through on that.
The people who have long-term success with their finances recognize that it’s about the choices they make—whether it’s their annual choices, their monthly decisions about money or their daily habits. Your choices are the chief determinant of how financially successful you’ll be in life. You can mess up with little things along the way, you can go on a shopping spree and then think, “I shouldn’t have done that,” but in the long run, that will be a little blip if you’re on track with your long-term scheme of things. Just like if you’re a stock investor, you can make one bad decision, but in the long run, that will be cancelled out by winners.
At the same time, it’s very difficult for most people to get to the level where they will consistently practice financial habits that work without also having the correct mindset to get them there. For some people, it may take several years to get to that point; for some, it’s an “aha” moment; but for most, it’s a process that happens. Some people have to hit rock bottom before they realize, “I need to change. This isn’t working.” I just think it’s hard to practice that kind of long-term discipline if you don’t have the idea in your head already: “This is for my best interest in the long run.”
A person’s relationship with money is very complicated, don’t you think? It comes from our parents, from our long-standing habits and from a deeper place.
You’re absolutely right. I do believe we all have different money personalities. Some of us are savers, some are spenders, some are splurgers, some are planners and some are hoarders. It does tie in a lot to behaviors and values and attitudes toward money that frequently have been inherited from our parents. Often the way we’ve seen our parents deal with money ends up being how we deal with money. Or, we might go the opposite way.
Money is an emotional topic. It’s not just about dollars and cents. It’s about our beliefs as to what money should do for you. Some people think it’s about power and control. Some think it’s about freedom and independence. Some think of what money can do for you as far as social standing. It goes far beyond the dollars in your bank account.
Why is it so hard for people to resist the desire for instant gratification they get from spending and using money in the short-term?
I’m coaching a woman who was homeless for a year. I understand now why people don’t delay gratification or make smart choices. The fewer dollars and resources you have available to you (credit, financial support system, home equity line, etc.), the shorter your outlook, and the more it is only about instant gratification. It’s very hard to see into the future because the future is totally uncertain; and it’s all about making everything happen today. For instance, you can’t talk to someone who is homeless about looking for a job. They would think, “I don’t have a phone number or address to put on the application. I don’t have a car to get to work.”
I extrapolate a lot from what I’ve observed in clients at various income levels. People who make $50,000, for instance, just think mistakenly that if they make $75,000, they’ll be okay. It’s really not about what you make, it’s what you do with the money you make that counts.
I’ve heard that the same thing is true with charitable giving. If they’re not making charitable donations when they make $40,000, they won’t make them when they make a million.
You’re exactly right—they’ll still spend the same percentage of their income, leaving nothing for charity. It’s called income creep. The more you make, the more you get accustomed to a certain standard of living. As your income rises, so do your spending patterns. Everything starts to creep up. You want a slightly better car, a nanny, or to eat at nicer restaurants. Everything starts to creep up to what you make, or in many cases, even higher.
Once people have made the decision to have more money, what are the first three things they should do?
1. Take a hard look in the mirror and face the reality of your situation. Part of facing this reality means listing literally all your debts in black and white. A lot of people have never done this. It’s a necessary step that can be emotionally wrenching. It’s simple, but it’s very powerful. Write down everything you owe—credit card bills, money you owe your sister, student loans, your car note, your mortgage, hospital bills and so on. You have to know what the starting point is.
2. Make a personal pledge and make it public. Write out what your goal is, what you’re trying to do. Write out, “I dedicate myself to being debt-free or more prosperous or to have a certain amount of money saved.” The personal pledge is about recognizing that the way you’ve handled your finances up until now hasn’t been working. Really make this something that’s visible. Put it in a place where you can see it frequently. Tell family members or friends who will be supportive and help you go in the right direction. It gives you accountability and helps you achieve your goal faster.
3. Really evaluate your practices or habits. Sometimes the way you handle your finances is closely tied to the people, places and products in your life. If you know you have a shoe fetish, then don’t walk down Fifth Avenue anymore. If you’re constantly going to the mall or to the club every Friday night, maybe you can limit these trips to special occasions. Frequently, this is a biggie and a hard one for a lot of people.
How you handle your finances is very much tied to the people in your life. Sometimes, it may mean you have to break the financially damaging patterns you’ve allowed to exist. For example, I really believe in America that 75% of adults are in financially abusive relationships—a relationship where someone you know, trust or love takes economic advantage of you. It happens frequently with partners and spouses when one is overspending and making poor financial choices and the other is trying to reign it in. One person is taking advantage of the other.
What are the most common emotions you see in people who have made the decision to have more money?
There’s a range of emotions that people experience. Because of the shock that looking at their finances may bring, they may feel guilt at the outset. It’s tinged with a huge amount of regret. Look at how much I’ve earned and I have nothing to show for it! They feel guilty when they realize how much money they’ve made and spent.
Sometimes there’s frustration or anger, but usually, it’s directed at somebody else—a spouse, for instance. I try to get people to see early on that there will be a host of emotions, but ultimately, there will be a sense of euphoria. If they can make it through those 30 days, there really will be a sense of renewal and a positive outlook. I teach people that the way their finances are right now—the current state of affairs—is 100% tied to what they, personally, have done or have not done in their lives.
Why will they feel euphoria when they have more money?
The reason you get a sense of euphoria, sometimes even a week into it, is that you suddenly say, “Yes!” because you get it. That’s the mindset shift you need to carry you through. You realize it’s you and what you’ve done or haven’t done that is bringing success. Once you take ownership and stop blaming other people or circumstances, you feel empowered like you wouldn’t believe. If it’s true that you’re the cause, it’s also true that you’re the solution. You realize you’re the one who can do it—a belief that can really fuel you through those 30 days.
What is most important beyond the first 30 days of choosing to have more money?
Have realistic expectations, and don’t beat yourself up if you slip. Falling off the wagon once doesn’t mean you have to stay off the wagon. People tend to be really amped up in the first few days. Keep your focus on the longer-term goals. If you make a short-term mistake, just brush it off and get back on track.
What is the belief you personally go to during times of change?
When I want to make a change in my life, I commit to making a choice, and I am really steadfast in my belief that the change is going to be for the better. I’ve had more than one occasion in my life where I’ve made a conscious choice to change, and it’s always been for the better.
The best thing about change is …
…your life actually gets better. It really does. I’ve found that the change has been permanent and lasting and tremendously rewarding on so many levels.
What is the best change you have ever made?
I don’t know if I should say this: Understanding that being in my marriage wasn’t working. That change I made, I feel like that was the best thing I ever did. It was a biggie for me.
For more information on Lynnette Khalfani-Cox, visit www.themoneycoach.net.