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A Better Way to Money
Financial Curveballs: How to Take a Hit, Make a Plan, and Come Back Stronger
00:32:04
Most people dealing with debt don’t talk about it. They rationalize, minimize, or wait for a “better time” that never seems to arrive. Lynnette Khalfani-Cox did the same—reporting on personal finance for a living the whole time—before she confronte...
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- [00:00]
A
If you have sleepless nights or anxiety or depression and you're worried about your finances and your bills, that's telling you something, right? And for a lot of folks, part of what tends to right the ship is starting to make choices that are in alignment with their values.
- [00:20]
B
Welcome back to A Better Way to Money. I'm Jennifer Bourget. According to a recent Northwestern Mutual survey, one in three Americans admit to spending everything they earn each month, including a lot of people who, on paper, look like they're doing just fine. A good salary, a nice house, a life that looks solid from the outside, not a paycheck to paycheck situation. Today's guest knows that story better than almost anyone. Lynette Calvani Cox, known as the money Coach, spent nearly a decade as a Wall Street Journal reporter for cnbc covering personal finance for a living. And the whole time, she was quietly carrying over $100,000 in credit card debt. Eventually, she paid it all off and wrote Bounce Back, the Ultimate guide to Financial resilience, the book she wishes someone had handed to her when things were at their worst. Whether a financial curveball comes out of nowhere or you experience a slow creep into a place you don't want to be, this conversation is for you. Before we get into it, if you want to take control of your finances right now, grab Northwestern Mutual's free family finances workbook@northwesternmutual.com podcast. All right, let's dig in. So money stress has a way of quietly taking over, even when everything looks fine on the outside. And I know you know that firsthand. You were a Wall Street Journal reporter for CNBC covering personal finance for a living while also carrying over a hundred thousand dollars in credit card debt. So take us through what that chapter of your life was like.
- [01:54]
A
Well, in a lot of ways, I tell people now that when I was deep in debt, I was very much in denial. I had this sort of misconception that because I wasn't missing any payments, that it was like, okay, somehow the debt that I was carrying, I was like, what's the problem? Debt collectors aren't calling me. They're not banging down my door. I don't have any late payments on my credit report. And so I kind of felt like I was lulled into a false sense of security. Also, I had a really good paying job. I was making a very nice six figure salary. Um, and so I was like, everybody has debt. What's the problem? You know? But obviously it was a problem. But yeah, it did get to the point where I was like, this is excessive. I was maxed out with my credit cards and all of the things that I was using to kind of float the lifestyle. And so after a while, I kind of got fed up with that. I was like, okay, this is insane to live this much on the edge financially. And I knew I had to make a change.
- [03:00]
B
Debt is so easy to rationalize. Right? Like, people will say, I'll deal with it after my next paycheck. I deserve this. You know, it's not that bad yet. A lot of us have been in these types of situations. So when you were in it, what were you telling yourself and how did the story you were telling yourself change as the debt kept growing?
- [03:23]
A
Well, part of what I told myself was like, I'm handling this. This level of debt is sort of normal. I can deal with it. And so the rationalization came in because, A, I wasn't missing payments, B, I had a good income and a good job, and C, I kind of felt like I could, quote, unquote, afford a lifestyle that I clearly was not able to afford. And so it was just kind of like a little perfect storm of, you know, mental gymnastics where you just kind of convince yourself and maybe, like, gaslight yourself into thinking everything is okay when, like, deep down, subtly, like, emotionally, you know, it's not. And the red flags, the warning signs that I had too much debt were absolutely there.
- [04:17]
B
And then you turned everything around. Like, you managed to pay off your debt and in three years. So you went from making minimum payments. Hey, I'm making my payments. To not miss a single payment while also launching a business, raising a family. Walk us through what that strategy was as well as, like, maybe your mindset that you had to have.
- [04:39]
A
Sure. At the time, I wish I could say that there was some, you know, magical strategy to quit or some, you know, complex formula that I put together or some, you know, step one through five that I knew to take to make it all magically disappear. Not by a long shot. Some of it was like, trial and error. So for me, one of the strategies that I started doing was not paying minimum payments again. I now realize that minimum payments in the short run really mean maximum payments in the long run. So it felt comfortable to pay minimum payments because I was like, okay, good. This is good for my cash flow. But of course, doing that minimum payments only is just like making the banks and the credit card issuers get rich off of you, because your credit comes at a cost, which is their profit. And I don't begrudge them their right to make A profit. But every time you extend and delay and put off making more aggressive principal payments on your debt, it just keeps you stuck in that cycle month after month, year after year. So I started doubling and tripling the payments that I was making to allow me to chip away at my obligations at a much faster clip. I negotiated some of my credit card interest rates, and as a matter of fact, I just got on the phone and asked all of my creditors for lower interest rates. Like literally nine times out of ten, when I would ask, they would do it. And so I found out that a lot of times getting such deals, it's yours for the asking. But a lot of people don't want to ask. They feel like, oh, it's me against the big bad bank, and they're reluctant to do so. But I tell people now, don't be afraid to ask. A closed mouth doesn't get fed.
- [06:37]
B
That's a really good tip. Yeah, asking for the lower rate that you're, you know, you're getting these offers in the mail and you're like, dang it, but just ask the bank you're already with. Now, I know not everyone's story looks the same, but at some point most of us are going to face some kind of setback, right? So your book Bounce Back is built around what you call the dreaded D's. Walk us through this list. Like, what are we actually talking about? And why is it smarter to plan for like the hard stuff than to assume it's just never going to happen?
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A
Well, even though I personally am not a millennial, I'm a member of Gen X. When I was in my 30s and early 40s, that's when stuff started going kind of south in a lot of ways. And I started personally encountering a lot of the so called dreaded Ds. So it's things like downsizing from a job, a death in the family of a main breadwinner, divorce, disability, debt, of course, damaged credit, even things like discrimination, which packs a powerful punch emotionally and financially. And so I tell people that again, none of us is immune to these life challenges. Right. So what I share with people now is that, you know, the smarter way to move in your life and in your personal finances is to anticipate and is to plan around some of these things that are just sort of naturally, cyclically and statistically likely to happen to all of us at one point or another.
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B
You've been running a personal finance education company since 2003, and I think it's great because you've actually like lived these things that you're telling people about, are you seeing anything new or different in how people are experiencing these setbacks or how people are thinking about them these days?
- [08:31]
A
I am seeing some differences. We've certainly seen evolution in the types of debts that people have succumbed to. So right now, you know, I remember when they were peer to peer loans, P2P loans came in vogue and were very popular. Right now is bnpl, Buy Now, Pay later. And that's a huge category for a lot of millennials. And again, the research around this, and I've been kind of sounding the alarm about it, to be honest, but the research around this that we're seeing is that the people who get into debt with things like Buy Now, Pay later, they are more likely to be millennials or younger people, or they're more likely to have already faced a dreaded D and a setback. And so they may have been priced out or not have credit, traditional forms of credit, like credit cards at their disposal. And so now to be able to afford a lifestyle, to keep up, to buy things, to purchase what they want, et cetera, whether that's travel, clothes, electronics, furniture, anything that they can kind of put on a type of installment plan where the thinking is, I'll pay this off in three equal payments. And the idea is that this is no interest, so this is going to be good for me. This is a better form of obligation. It's not a traditional, like a credit card debt. Well, again, we're seeing some of the numbers come out from this now. And a lot of millennials and others are saying, oh my God, I regret this because they have so many Buy now, pay later obligations that they can't even keep up with or they're not tracking appropriately. And so, yeah, we've seen an evolution in terms of products that are offered to people. We've seen an evolution in terms of people's abilities to handle debt. In my estimation. I think the debt problem in America has gotten worse over the last two decades, unfortunately not better. And also because so much of, like, consumer spending, 70% of the economy is built around debt and around consumer spending, but also jobs, right? To the extent that people feel comfortable and they feel like, okay, my job is secure, then they're willing to spend, they're willing to take on credit and loans of various kinds. But obviously right now we're dealing with an uncertain economy, right? At so many levels, inflation is still rearing its ugly head. And I think that for a lot of people, they feel like, ah, the walls are Closing in a little bit here, that there's just, it's just too much to handle.
- [11:07]
B
And you talked about buy now, pay later. I think of like, also like my advice sometimes, like I was like, I'm never paying for a monthly subscription. I hate monthly subscriptions. But now there are so many things that I have it and you know, I have to weigh like, okay, do I do the annual? Do I do the monthly? I usually do the annual to save money, but then sometimes I stop using it and I forget and then it renews and I'm like, oh, so, you
- [11:32]
A
know, we've totally done that. And listen, we've moved to a subscription based economy.
- [11:39]
B
Yeah.
- [11:39]
A
Like, you know, when you asked about kind of what's now, what's different now, a lot of exchange, I was referencing jobs. I want to complete a thought there because AI, obviously that's something new. Right, Right. And so to the extent that AI is now in part responsible for an ongoing trend of job losses that's taking away people's feeling of comfort and security. And for some people, it's forcing them to turn towards debt. If they haven't sort of righted the ship before or set a game plan for how do you deal. If you have, say one income in the family now where you previously had two, then the typical thing that people do is rely on plastic or on credit of some form. And so, yeah, we see that people are turning to credit cards more often turn into buy now, pay later, turning to personal loans or they're part of that gig economy. Right. Another shift that we've seen where it's like, let me have a side hustle, let me have a freelance contract job, let me have a second or third position. And there's only so far hustle culture can take you because keep living, you know, as I've done, it gets exhausting. And you're just like, what am I working for? I'm just literally working to keep a roof over my head. So, yeah, we're up to our eyeballs in debt in this country. And it really does behoove us to think about what are the strategies to mitigate some of this and to make sure that we, we don't wind up in a spiral where it kind of seems hopeless and helpless because that's where they get stuck, where they feel like, ah, I can't get out of this, or they kind of throw in the towel mentally. They may not say it, or sometimes they do, but when you're deep in debt, and I know this again from personal experience, there's a part of you that goes, I already owe 30,000. What's another thousand or two? Like, so when you want to do something or rationalize or justify it or say, oh, just this one time or whatever, it tends to kind of like, create this mindset that, like, geez, I'm already kind of screwed here. What else? How much worse can it get? You know, kind of thing.
- [13:56]
B
Life events don't come with a warning. A layoff, a health scare, a divorce, a new baby. Any one of them can completely reshape your financial picture overnight. And the people who recover fastest aren't the ones who earned more or saved perfectly. They're the ones who had a real plan in place before things got complicated. That's exactly what a Northwestern mutual advisor is there for. They'll work with you to build a financial plan that's designed around your actual life, Your income, your goals, what you're protecting and what you're building, so that when life takes you off course, you're not starting from scratch. Coming up, Lynette gets specific. The new reality of debt, the practical moves, and her best advice for people who feel like their spending is slowly getting out of hand. Let's bring her back in. I'm curious what you think some of the big warning signs are. Like, I know sometimes when we think of other people in their debt, we kind of look at it differently. Like, you know, there's that movie, Confessions of a Shopaholic. I don't know if you've seen that, where she's, you know, has to freeze her credit cards because she just loves shopping and she's addicted to that. But it's not necessarily like that experience for everyone. So from your own personal experiences as well as maybe your professional knowledge, what are some of the big warning signs that the debt is someone's accumulating is dangerous for your financial health versus something that's maybe normal for this stage of life.
- [15:17]
A
Well, normal is a really weighty, loaded, subjective kind of word. So I guess part of what I would say is it's really not the financial side as much, because, honestly, people know the financial side. Like, if you're like, I can't pay my bills. I don't have enough money to pay my bills. You know, that that's a problem. But I think that really, where we first get information and get data that's relevant is, like, in our own minds and our emotions and our hearts and in our relationships. Like, the personal stuff kind of shows up before the actual financial stuff shows up. And here's Some. Here's some examples of what I mean by that. If you are stressed to go to the mailbox or to get your. To open up your credit card statement, that's telling you something, right? If you're like, oh, I got a bad feeling in the, in the pit of my stomach. If you have sleepless nights or anxiety or depression and you're worried about your finances and your bills, that's a strong signal. If you're arguing with your partner or your spouse over money issues or who spent what and whatnot, again, those are all tells, right? That your finances need more attention, more love and attention, more time spent and perhaps a reorienting of things. And for a lot of folks, part of what tends to, right, the ship is starting to make choices, spending choices, investment choices, debt payoff choices, et cetera, that are in alignment with their values and what they really want and what they say they want. Sometimes there's a disconnect. People might say like, oh, my God, I totally value education. This is so important to me. And then you're like, oh, okay, are you saving for your kids college education? They're like, not yet. You know, and so it's like, okay, well, how important is that education really for you? Because, you know, you had student loan debt and you know, when your kid, who's now three years old, 15 years from now, college is going to be a lot more expensive. So sometimes we try as money coaches and as financial experts to help people to close the gap between what they actually do and what they say they want or what they say they want to do, Right? And it's not for us to judge. It's not for us to point a finger or to wag, you know, and say, oh, you're doing something bad and wrong. Because all the shame and the blame and all that, honestly, it doesn't work. It's counterproductive. It's easy for us to say, well, geez, you, you, you make $60,000 a year. You can't spend $70,000 on math. On paper, of course we know that. Yeah, of course. You don't spend more than you, than you earn. Duh, we get it. But have we taken the time to kind of do a deep dive with somebody and to talk through, like, so what is it that you're spending on? And if they are saying, I go out to eat three times a week or every Friday, my night, my friends and I do this, and you ask them, so what do you get out of that? And do you feel like what you're doing is about, right? A healthy amount, a little less than you'd like or more than you'd like. Let them come to the answer on their, on their own, right? And then sometimes when they kind of talk it out and look at it, they're like, honestly, I really don't need to go out three times a week. I could probably do like once a week and maybe cut back here or, you know, so you kind of explore things with them again, without judgment. I mentioned to you before that I didn't have a plan at first, right. I knew the advice that people were like, pay off your high interest rate credit card debt first. That absolutely didn't work for me. Not at all. So. And now, again, two decades into this, I don't teach people that method. I tell people, attack your own area of pain, whatever it is that's bothering you, go after that most aggressively first. Because that's what somebody's going to stick with over time. They're going to see the results of their actions and they're going to feel good about it. So for some people, yes, they're really upset, especially in this current interest rate environment. They're like, oh my God, my credit cards are like 20 something percent. I can, I can't stand to see all this. I'm paying these payments, but my balances aren't really shrinking, so that frustrates them. So maybe they do want to focus on high interest rate debt. But other people have a lot of credit cards outstanding and they're like, I can't even keep up with it all. I'm juggling, I forgot I missed payments, you know, I got dinged with a late payment. And so for those people, the better strategy is actually to pay off the cards with the lowest dollar balance first so little they can chip away and eliminate some of the cards. So they might have a card that has just, you know, $400 balance on it. Maybe they pay 200, 200, that one is gone. And then they take the next $200 that they were applying and they go to the next card. So that's another strategy to address that person's pain point. So again, I know that was a long winded way of what I'm trying to say, but really the strategy is, you know, tackle the pain point, whatever's bothering you, go after that first and, you know, marshal more resources towards that.
- [20:30]
B
And I know you've mentioned this and you talk about this in your work, how shame surrounds the financial struggle. Why does that silence about it make the problem so much worse? And then how can people start to break it?
- [20:46]
A
I think the reason that shame really prevents people from moving ahead with their finances in general, and certainly with debt, is that it prevents them from reaching out to get help. And so many times it's like one phone call could turn the tide. Unfortunately, most of us who've been in debt, we suffer in silence. And for those of us who are college educated, it's almost worse. So we'll say things like, for me, I'll say, I have a master's degree, I should have been smarter than this, how could I have gotten myself into this hole? Or we'll say things like, I made my bed, I gotta lie in it, I got myself into this, I gotta get myself out. And I'm like, no, you don't. You don't have to do this alone by any stretch of the imagination. So one of the things that I share and Bounce Back the first couple of chapters, it's not personal finance advice. It's not like prescriptions on how to financially recover immediately. No, the first part is about getting your mind right. It's about establishing community and connections and doing a lot of self care to be able to be, to move forward in the best possible manner. And so one of the things that I talk about in Bounce Back is getting help is not being afraid to reach out. We also think mistakenly that we're the only ones. We're like, okay, everybody else is out there. You're seeing your friends on social traveling, living their best lives, ostensibly living their best lives. You know, again, they're giving you the curated social media version, right? You don't see the stress when the bills come or whatever. But the idea is if you have connections of various kinds, the people who recover from setbacks like the dreaded D's more quickly and in a more robust and full manner are those who prioritize community and people and relationships. It's not really like the personal finance advice that people are like, what? Like this sounds kind of woo woo here. What are you talking about? But having the right people helps in so many ways. Loss your job. Okay, you might take some time, take a beat, to regroup, because it's a devastating emotional blow to get a pink slip, right? But then when you kind of get back in the saddle and start searching for another job, if you've been downsized and that's the dreaded D you're facing, who's going to help you to get that next one? Probably a friend, a colleague, a former coworker, somebody you know. So having those relationships can help you to get reoriented in the job front. Again. People who've gone through a divorce, I'm not telling you to jump back in the saddle there immediately and then try to, you know, let me find another spouse. Just one way to do it, you know. But again, later, after you've processed, done your own work and when you're ready again, just having. It might be your social circles or connections. It could be through your church, your synagogue, your mosque. It could be through your place where you volunteer or do any kind of civic engagement, social activities that you do. It's going to be the relationships and the people around you that you're like, oh, wow, I just happened to meet somebody, I wasn't even looking kind of thing, you know. So it's better to kind of get yourself together first before you go on to the next phase whenever you're trying to recover from one of the dreaded D's.
- [24:17]
B
Now, Lena, I want to ask you a little bit about savings too. Like emergency funds savings that's, you know, for long term goals. That's kind of Personal Finance 101. But contributing to those things while you're already in debt can feel really impossible. So how should we be reframing this problem? Like how can we have a financial plan and how can that help achieve maybe this balance of while, you know, we're in debt and we're also trying to save.
- [24:46]
A
Well, Jen, you said the key word balance. And I'm often asked, what should I do first? Save more money or pay off debt? And sometimes people don't like the answer because it's. You have to do both simultaneously. I know it's hard, I know it's a challenge. But there's a method to this madness and there's a reason why doing one or the other exclusively actually hurts you financially in the long run. If you say, I just want to focus on debt payoff, if you're taking your income, for example, and you're like, I can't take it with these student loans or this credit card debt or these buy now, pay later obligations and all I want to do is just focus on getting rid of the debt, that's it, that's it, that's it. And you don't have any savings whatsoever, let me tell you what's going to happen. Something is going to go wrong in your life. It might not be one of the big dreaded Ds. It could be a smaller thing. You might get a flat tire, your toilet could leak in the house or an apartment. And you absolutely have to call a plumber. Now, all of a sudden, your $200 tire or your $500 plumbing visit, the bill is due and you have no savings whatsoever. So what are you forced to do? Whip out the credit card, relying on plastic, and then you go deeper into the cycle of debt. So without that emergency savings on hand, you kind of like, put yourself back in that debt cycle time and time again. Ditto for the opposite end of things. If you're like, I just want to keep saving because I'm trying to reach a goal or I want to do this, I'm just, I'll worry about the debts later. So if you only focus on saving, saving, saving so much that you're not aggressively paying down that credit card debt, you could still be making your payments, but your debt balances actually grow, especially given double digit interest rates. So again, you have to do both.
- [26:47]
B
And a lot of people think that they want to do this later. They are like, I'm gonna wait after all the debt is gone, I'm gonna wait to worry about paying off all that. After my kids are through school, things are gonna settle down a little bit. What would you say to someone who keeps waiting for the right time to start this and what are the moves they should be making right now? Maybe no matter what position they're in,
- [27:10]
A
there is no, you know, ideal time to start. I don't know if it was Warren Buffett or somebody else who said the best time to plant a tree was, was yesterday, you know, and the next best time is now, today, kind of like get it going right, to be able to plant those seeds that later you can profit from. And so it's always better to just, if you think something is of value to you right now and aligns with your values and what you think is important, better to start now. Whether that's saving, paying off debt, investing, being prudent with your finances overall, looking for ways to connect with professionals. If you think it's a good strategy, and I absolutely know that it is, to have advisors, then why wouldn't you start assembling your team now? You know, you can look for a financial advisor, you can look for a cpa, you can look for a money coach or just an educator of any kind that you feel aligns and can teach you something right? So you don't have to wait for some magical point in the future to get started.
- [28:16]
B
And Lynette, for people listening right now, there's a lot of millennials who are experiencing their first ever real financial curveball. Maybe a dreaded D, a layoff or a medical bill, a divorce. What's the first move you would say when everything feels like it's falling apart? What should they do?
- [28:35]
A
I think the first step after you've had a setback is to take a step back and to assess. So this is a hard thing for people to do because the inclination, the instinct is let me fix it. Let me jump right back in. Like I lost the job, let me go back out there and go get another job or, or I had a credit problem, let me just try to double down on that and do something to fix the credit problem. But without any sort of thought or analysis or expertise or guidance and you could have just restarted the clock. So it's not always a good idea to just be like, let me just fix the problem. Let me just jump right back in there. So the first step is actually pause, like do nothing, like sit still. Because the emotion that is tied to whatever event that's gone on means that you're just not in your right, perfect, you know, or more ideal frame of mind to make good financial choices. So again, I know it's counterintuitive, but the pause is actually part of the process. The pause is actually part of the, part of what will help you to move forward.
- [29:48]
B
That's Lynette Kalfani Cox, the money coach, New York Times best selling author and someone who's lived every part of this conversation. Here's what her story makes clear. It never feels like the right time to get your finances together. Life doesn't wait. A layoff, a medical bill, a relationship ending. Any of life's curveballs can hit before you feel ready. But the earlier you have your plan plan, the less it knocks you off course. That's where Northwestern Mutual Advisor comes in. They've seen it all. The debt, the avoidance, the pivots, the fresh starts. They're not there to judge where you've been. They're there to help you build a flexible plan that can keep up with whatever life throws at you next. Start with Northwestern Mutual's free family finances workbook@northwesternmutual.com podcast and when you're ready to talk to someone and advisor is right there. Next time on A Better way to Money. There's always something that feels like I'm just not ready yet. There's some hurdle in the way and being able to just start the plan matters more than is the plan perfect. We've spent this season talking about the big life moments that reshape your finances. But what about the blind spots hiding in plain sight. Jonathan Gase from North Northwestern Mutual joins us to talk about what most people get wrong about money, why intention matters more than income, and how to finally close the gap between what you know and what you do. Tap follow in your podcast app so you don't miss it. Northwestern Mutual is the marketing name for Northwestern Mutual Life Insurance Co. NM and its subsidiaries, including Northwestern Mutual Wealth Management Co. NM, WMC Investment Advisory Services and Federal Savings Bank. NM and its subsidiaries are in Milwaukee, Wisconsin. Not all Northwestern Mutual representatives are advisors. Only those representatives with advisor in the title or who otherwise disclose their status as an advisor of Northwestern Mutual Wealth Management Co. NMWMC are credentialed as NMWMC representatives to provide advisory services. Lynette Calfani Cox and TheMoneyCoach.net are not affiliated with Northwestern Mutual and the views expressed by Lynette Kalfani Cox do not necessarily represent those of Northwestern Mutual or its subsidiaries.