Zero Debt: The Ultimate Guide to Financial Freedom 2nd edition

By Lynnette Khalfani-Cox

Would you like to be free from financial worries, rest at night knowing your bills are paid, and have peace of mind when it comes to money matters? Then you need Zero Debt – a 30-day action plan to fix your finances.

In Zero Debt, you’ll discover:

•How to get annoying creditors off your back

•Insider secrets to reduce interest rates or eliminate credit card late fees

•Your legal rights – and what bill collectors can and can not do under the law

•The best strategies to clean up your credit report or fix errors in your credit file

•How to make lifestyle changes that will save you money for decades to come!

If you want to be debt-free and achieve financial freedom, you need an action plan to guide you. This book is your step-by-step plan. It’s simple. It’s easy to understand. And it works.

• Language: English
• Publisher: Lynnette Khalfani-Cox
• Release date: Feb 24, 2011
• ISBN: 9781932450972

Book preview

ZERO DEBT

The Ultimate Guide to Financial Freedom

Second Edition

Lynnette Khalfani-Cox

Published by Advantage World Press

P.O. Box 1307

Mountainside, NJ 07092

www.AdvantageWorldPress.com

Copyright © 2011 by Lynnette Khalfani-Cox

All rights reserved.

Smashwords Edition

ISBN: 1-932450-97-1

No part of this book may be reproduced or transmitted in any form or by any means, electronic, or mechanical, including photocopying, recording, scanning or by any information storage and retrieval system without the prior written permission of the Publisher.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering legal, financial or other professional advice. Laws and practices vary from state to state and if legal or other expert assistance is required, the services of a competent professional should be sought. The author and publisher specifically disclaim any responsibility for liability, loss or risk that is incurred as a consequence, direct or indirect, of the use and application of any of the contents of this book

Table of Contents

Acknowledgments

Other Books By Lynnette Khalfani-Cox

Introduction

Day 1: Stop the flood of credit card offers

Day 2: Make a resolution to stop digging

Day 3: Put all your debts in writing

Day 4: Order your credit report and FICO score

Day 5: Call your creditors & negotiate

Day 6: Switch cards if necessary

Day 7: Always exceed the minimum payment due

Day 8: Dispute any inaccuracies in your credit file

Day 9: Educate yourself about your legal rights

Day 10: Stop collection agency harassment

Day 11: Prevent identity theft to protect your credit

Day 12: Set up a good filing system

Day 13: Face the truth about your situation

Day 14: Create SMART financial goals

Day 15: Figure out the $69,000 question

Day 16: Scrutinize your spending

Day 17: Make a realistic budget

Day 18: Find 10 ways to cut your spending

Day 19: Adopt five lifestyle changes to save more money

Day 20: Adjust your W-4 withholdings if you get a refund

Day 21: Sell or donate stuff you don’t want, use or need

Day 22: Find a way to generate additional income

Day 23: Apply for a home equity loan or equity line of credit

Day 24: Refinance your auto loan

Day 25: Pick a proper debt payoff strategy

Day 26: Weigh the pros and cons of debt management plans

Day 27: Evaluate your existing insurance coverage

Day 28: Draw up a will

Day 29: Open a hands off account & automatic savings plan

Day 30: Prepare to become a positive financial role model

Day 31: Address other money woes or special circumstances

About the author

Acknowledgements

I first want to thank the wonderful man in my life, Earl Cox, not just for being a phenomenal husband and life partner, but for also being an incredible business agent and manager.

To my wonderful children, Aziza, Jakada, and Alexis, thank you for giving my life so much laughter, love, and purpose.

To Deborah Darrell, how many ways can I say thank you? I can’t express how much it means to me to constantly have your personal and professional support, your media smarts, and your heartfelt passion for everything I do.

To my exceptionally caring parents, my very special in-laws, my five fabulous sisters, my extraordinary Uncle Otis, and my entire extended family: thanks for all of your love and belief in me. Despite my hectic schedule, please know that you are constantly in my thoughts and the love I have for each of you is always in my heart.

Other Books By Lynnette Khalfani-Cox

Perfect Credit: 7 Steps to a Great Credit Rating

Your First Home: The Smart Way to Get It and Keep It

Zero Debt for College Grads: From Student Loans to Financial Freedom

The Money Coach’s Guide to Your First Million: Seven Smart Habits to Building the Wealth of Your Dreams

Investing Success: How to Conquer 30 Costly Mistakes & Multiply Your Wealth

The Millionaire Kids Club Volume 1: Garage Sale Riches

The Millionaire Kids Club Volume 2: Putting the ‘Do’ In Donate

The Millionaire Kids Club Volume 3: Home Sweet Home

The Millionaire Kids Club Volume 4: Penny Power

Introduction

When I first wrote Zero Debt, I described credit card bills as the most heinous financial plague afflicting Americans. That was nearly five years ago. Since that time, the debt crisis in the United States has worsened dramatically – and chances are, you’re caught up in it.

Do you worry or feel stressed out about your bills?

Are you living paycheck to paycheck?

Do you ever argue with your spouse or family members about money?

Have you been forced to put off certain dreams – like buying a home, saving for retirement or launching a business – just because you can’t afford to save for these goals?

Would you like to have more money in the bank each month, instead of turning over your hard-earned cash to creditors?

Is it difficult for you to stick to a budget and juggle today’s financial responsibilities, let alone set aside money for the future?

If any of these scenarios sound familiar, you’re not alone.

Two out of three Americans with credit cards don’t pay off their balances in full each month. The sad truth is: they can’t afford to. If you’re one of these people, you likely owe nearly $10,000 on your credit cards, which is the average credit card debt in America, according to Cardweb.com.

Some of you are just trying to make ends meet, charging basics like groceries, gas and medical bills. Others of you whip out your Visa or MasterCard to satisfy your every whim, from designer handbags and fancy clothes to home furnishings and exotic vacations. I’m not passing judgment on what you choose to buy. But I am pointing out that no matter what you’re purchasing, the result is destined to be the same: if you’re constantly using credit cards to finance your lifestyle, you’re setting yourself up for long-term economic failure. It may not hit you this month, or even this year. But sooner or later, you’re going to hit rock bottom. You may not even see it coming. Yet some unexpected setback will happen – like getting laid off from your job, or going through a divorce – and all of a sudden, your debts will feel completely overwhelming. Think you have problems now? Well, that’s nothing compared to what’s in store if you allow your debt to continue spiraling out of control. That’s when the fretting and sleepless nights really begin. Nasty debt collectors will start calling you at all hours of the day and night. Your credit rating will suffer due to missed payments. And you’ll dread opening your mail because you can’t stomach the thought of facing yet another bill. Unfortunately, ignoring the problem won’t make it go away. Refusing to deal with your debts only causes you to keep living paycheck to paycheck.

Living the Bling Bling Life

Perhaps you’re in that situation now. Those of you living what I call the Bling Bling lifestyle know exactly what I mean. Yes, you’ve got all the outward trappings of success – maybe a nice car, fine clothes, a closet full of shoes, or various trinkets, gadgets and electronics galore. But none of these things are putting money in your pocket. None of these possessions is building your net worth. In fact, deep down you know that despite all the material goods you’ve amassed over the years, your life is far from secure financially. You work hard, but have very little of value to show for your efforts – and your mounting debt is a big part of the problem.

Despite this stark reality, living on credit has become the American way of life. Buying on credit is so common – for heaven’s sake, you can pay for everything from a Big Mac to your federal and state taxes with plastic – that 92% of those polled by KRC Research said consumers have too much debt.

However, until a serious financial crisis began pummeling the U.S. in 2008, our country’s leaders failed to seriously address our credit and debt woes. Before then, if you listened to some politicians and financial experts, they’d tell you that everything is just fine. They said the economy was growing, that jobs were being created, and that overall, Americans were in good financial shape. I’m not sure what America they were describing, because I saw exactly the opposite trends occurring and the numbers prove me right:

Consumer debt is at an unprecedented $2.4 trillion – including roughly $1 trillion owed on credit cards

A record two million households filed for bankruptcy protection in 2005, before a bankruptcy reform bill passed; in 2008 bankruptcies are again on the rise

The national savings rate is the U.S. is in the flat-to-negative territory, similar to the Great Depression

Mortgage foreclosure filings peaked at 2.2 million in 2007, and were expected to hit 2.5 million in 2008 as more homeowners struggle to pay for their homes

While the evidence is overwhelming to show that staggering numbers of people are up to their eyeballs in debt, I don’t need statistics to tell me that many of you are in financial trouble, and desperate for a way to fix your finances.

I know this is true because I hear from people like you every day; good people who are dealing with bad situations. And just as I don’t need statistics to tell me the truth about America’s growing financial crisis, neither do you – if you’re honest with yourself and what you see around you. Take a moment and think about it: Have you had to use credit or borrow money from a family member or friend in the past year or so to get by? Conversely, have you been asked to give or loan money to someone in need recently? If you said yes to either question, you probably have a glimpse of what it’s like to struggle financially.

Now you can stick your head in the sand if you want to, and pretend that everything is okay. Or you can face the truth about the debt problem in this country – and most important, your own debt problem – and you can begin to turn things around. The good news is that, believe it or not, you can make an incredible transformation in your personal finances in just 30 short days.

I Went From $100,000 in Debt to Zero Debt & You Can Too!

Some of you know that I’m a financial journalist by background and training. You may have read my articles in the Wall Street Journal, Black Enterprise and Essence magazines, or on Dow Jones Newswires and other publications. Or perhaps you watched me on television when I was a reporter for CNBC, or when I was a guest expert on The Oprah Winfrey Show, Dr. Phil, Good Morning America, The Tyra Banks Show, or The Rachael Ray Show. What many of you may not have known, however, is that at one point I was very deep in debt – to the tune of $100,000 worth of credit card bills alone.

Fortunately, I managed to pay them all off – in less than three years – without ever missing a single payment. And no, I didn’t file for bankruptcy protection to get rid of my debts. Nor did I enter a credit counseling program. I certainly didn’t cut up my credit cards and go into one of those debt management programs advertised so often on the radio and television. Instead, I got smart: about my spending, how I was handling my money, and especially how I was managing my credit and debt.

After I became debt-free, I wrote Zero Debt, and it soon became a New York Times and a Business Week bestseller. Zero Debt is written as a 30-day action plan to help you wipe out debt, improve your credit, and jump start your finances – no matter what your current situation.

Zero Debt has touched a nerve with tens of thousands of readers, around the country and around the world, because debt is such a huge issue for so many people. And I mean all people: black and white, Asian and Latino; young and old; highly educated and not; well-paid workers along with those making the minimum wage.

All of the strategies I used to get out of debt – and more – are outlined in this book. I’m pleased to say that since the original publication of Zero Debt in 2004, I’ve remained debt-free. Over the past four-and-a-half years, however, scores of other people have become mired in debt. More significantly, the entire credit and debt arena has shifted enormously. Congress passed new laws concerning consumer debt and bankruptcy. Interest rates fluctuated, the global credit crunch emerged, and consumers faced higher borrowing costs for everything from mortgages to credit cards to auto loans. Additionally, new credit-related products and services emerged. Here are highlights of some of the important developments that prompted the need for this revised, updated edition of Zero Debt:

• A sweeping overhaul of the bankruptcy system

Bankruptcy reform legislation, passed in October 2005, made it more difficult for consumers to wipe out credit card debts. What options exist if you’re cash-strapped and can’t pay your bills? Also, what are the main differences between Chapter 7 and Chapter 11 bankruptcy filings now? How can you prevent serious financial difficulties and avoid bankruptcy? Finally, if you were among those individuals who did file for bankruptcy protection in recent years, how can you restore your credit standing? This updated version of Zero Debt provides the answers to these questions and more.

• The debut of entirely new credit scores

In 2006, the Big Three credit reporting bureaus – TransUnion, Experian and Equifax – surprised the industry (and consumers) by launching a new credit score, called VantageScore to rival the benchmark FICO credit score that is used by most banks and financial institutions. This new credit score gives you various credit grades – either A, B, C, D, or F – just like the ones given in school. So, should you buy this credit score instead of, or in addition to, your FICO score? Or do you need the new VantageScore at all? Are lenders starting to use these instead of FICO scores? And is the new credit scoring system, which promises to offer one unified credit score, more accurate than what is currently available? You’ll find the information you need here in the second edition of Zero Debt.

• Greater access to credit information

In the time since I first wrote Zero Debt, The FACT Act has taken effect nationwide, giving individuals in every state the right to obtain one free credit report per year. Now that you have ready access to your credit files, how can you best monitor, protect and improve your credit standing. Additionally, how should you battle one of the biggest problems of the industry, namely, that 70% of credit reports contain mistakes? This book gives you the tips and tricks that can help you tackle this issue, and more quickly boost your credit score.

• Higher minimum payment requirements

As of 2006, a new federal law increased the minimum payments on most credit cards from 2% to 4% of the outstanding balance. How can you deal with this change, and is this good or bad for you overall? This updated rendition of Zero Debt tells you everything you need to know.

• Rising late charges and credit card penalty fees

If you’re carrying plastic in your wallet – and 75% of all adults in the U.S. have at least one credit card – you’d be wise to know the true cost of using credit. This second edition of Zero Debt details the litany of fees you may be subjected to; including many charges that you didn’t know existed. I’ll explain how to avoid these costly fees, as well as how to fight credit-card penalties if they appear on your monthly statements. I’ll also tell you how to negotiate with your creditors to make your debts more manageable.

• Mandatory credit counseling

If you file for bankruptcy, credit counseling is now mandatory. This change is a huge boon to the credit counseling industry, which is notorious for consumer abuse. Even if you’re not on the verge of bankruptcy, I’ll reveal what you should look for – and what to avoid – in picking a credit counseling or debt management