What is the current state of consumer debt in the US?
On the one hand, people are really striving for homeownership, and people also like to improve themselves by getting a higher education. But unfortunately, what a lot of people don't talk about is on the other side of those two big goals, homeownership and college, is that nasty little four letter word, debt. We've got $1.5 trillion in student loan debt outstanding, a trillion dollars in auto loans, so the challenge is how do you meet those goals without putting yourself in the hole financially?
What is biggest mistake people make about debt?
Part of the big mistake that a lot of people make is ignoring it. So many people abdicate financial responsibility. I'm all for people having trusted advisors and accountability partners, because I think that having an expert in your corner definitely helps you to reach your goals more quickly, but what I don't like is for people to just turn over their finances 100% to any third party, whether that's a spouse, a family member, an advisor exclusively, without being plugged in and engaged and sort of knowing what's going on with their finances.
How can a person work to get out of debt?
If you spend more than you earn, you will always be broke and in debt. That's economics, you will never get around that. And so it really doesn't matter if you make $50,000, $150,000, $15 million, if you're living above your means, it's going to catch up with you. It's frankly, much easier to get out of debt than it is to stay out of debt, because staying out of debt requires a mindset shift. It really does require you to reorient your thinking and to not care so much about everything else that's going on around you. And increasingly, as we move into this era of social media, I find that a lot of people fall victim to this, because they're watching their Instagram pages or on Facebook, and they're seeing what other people have or the curated version, at least, of what people want you to see. The challenge is to understand where was I a year ago? Where was I two years ago? I'm not going to compare myself to others. I'm just going to benchmark myself against me and measure my financial progress. Once you start doing that and kind of disassociating yourself to the extent that's possible from what other people are doing, it actually really liberates you. Because you start to say I'm on a unique path and that journey is all about me and what my financial goals are, what my priorities are, and what my special considerations are given my family circumstances.
What steps can women take to be financially successful?
One of the things that I think women in particular need to do, especially young women who are starting out in their careers, is to negotiate more. And this is true whether or not you're an employee working for somebody else or you're a business owner and you're charging clients. I think when women fail to realize their value, it impacts them financially for decades to come. As a matter of fact, research shows that women who don't negotiate, they actually lose out on about 2 million dollars' worth of earnings in their lifetime. So it's critical that women see themselves as capable and that they know their worth and frankly, assert it and demand that they get paid what they are, in fact, worth.
Personal finance expert Lynette Khalfani-Cox shares how goals like home ownership and higher education can be achieved by absolving consumer debt.