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It's been 3 years since Caleb Hammer posted this video of a 27year-old with more debt than anyone should ever have on the financial audit. And in this video, I'm going to provide some insights that I think were missed in this. Now, in fairness, Caleb's exploded since then. Congrats to him. It's great. I want to do more of these breakdowns. My argument here isn't to try to bag on Caleb or say, "Hey, this is wrong. This is right." It's simply to say, "Hey, here's some ideas that you as a viewer could potentially use to help you if you're in a situation like this." So,
let's set this up. This girl right here, at the time of this recording, 27 years old, gave life coaching advice, making roughly on a good year $80,000 a year. But she's buried in debt. She's upside down on her car by like 15 grand. She's got a 590 credit score. She's paying 21,100 bucks in rent. And she's blowing her money every single month buried and drowning in credit card debt. And Caleb had some suggestions for her. And I've got some suggestions for her as well. Obviously, we are going to use her as an example because hey, she's 3 years older now. So maybe Caleb could be happier and maybe she's not as sad. But let's analyze some of the recommendations that Caleb gave and then some thoughts here. So obviously
one of the first places that I look at is I look at income. Obviously we think it is totally ironic that somebody w who's getting crushed by consumer debt is actively charging clients in Austin, Texas for like spiritual and life advice. Now she says she's not giving financial advice that she's just giving life coaching. But it's still kind of ironic. It is kind of like a high school graduate going in to manage someone's retirement portfolio, right? So, there's there's something a little strange about that, but she's able to make money from it. The question that I have is, what can we do to pump the income? See, at 27 or 30 years old, you actually have a lot of options. See, she
actively brags about only working 5 hours a day, which Caleb rightfully turns that around and says, "Well, then you should have plenty of time to meal prep, make your own food, and stop spending money outside." Which I totally agree with Caleb on. Restaurant expenses are ridiculous, and they keep getting more expensive. In the last 3 years, we've probably seen restaurant prices go up another 50%. It's just gotten worse over the last 3 years. Inflation's been bad. But Caleb made a comment that I really disagreed with and it motivated me to make this video. Caleb suggested that more income wouldn't solve her problems. That $80,000 a year is actually pretty good. But Caleb's got to
remember she doesn't have an employer paying her half of employee uh or um self-employment taxes, which means she's paying an extra 7 and 12% on top of what other people who have a job are making, which means she's bringing home even less than it appears. probably somewhere around4500 to 5k per year, which in Austin, Texas gets eaten up pretty quickly, especially if you're renting a place for $2,100 a month. Caleb suggested, hey, maybe if we cut expenses, liquidate our investment for portfolios, and just throw it into paying off credit card debt and living beneath our means, we'll be okay. But I want to help this person get from just okay to the next level. And maybe not them. Maybe it's you or somebody you
know. My thought here is if she's working a fivehour workday, she could be the perfect candidate for what a lot of people do and that is you have a primary hustle which is a W2 job and you have your side hustle which could be life coaching. Now, a lot of people don't like to hear that because they hear, "Wait, so you're saying you got to get a traditional job." But here's what a traditional job does for you. Traditional job smooths out all those crazy girrations in your income where one month you clear a big check a check from entrepreneurship and another month you've got nothing or worse, another two months you've got nothing and you're
going deep into debt. That's exactly what her problem is because she doesn't have consistent income. she spends when she's a queen and when she's in the toilet, she's crying because she's deep in debt. This is very common in self-employment. But maintaining that self-employment, which is also something that Caleb didn't touch on, creates a massive opportunity for tax write offs because it's active income. her side hustle, her coaching is active income, which expenses from her active income could help offset her W2 job income, especially if she starts being more creative with her write-offs, like branding her car, putting her life coaching, you know, business name or whatever on her car to write off her car
as an advertising expense to write off some of this apartment as an office. convert half of it into a studio where you visit clients. Maybe not even half of it, a room of it. Uh, you know, a little entryway and then a place where you visit clients and you talk to them if you're really doing this. Or even if it's just a Zoom room, people don't actually have to come to your apartment. It could be a Zoom room in an office where you prepare for your side hustle and you do your side hustle coaching work. These are opportunities that I think Caleb really left on the table. I get when we're talking about actively working just 5 hours per day or
sometimes even worse. I feel like there was this implication she might only work 5 hours a week. Well, that creates an opportunity for a decent 8 hour a day job. Plenty of jobs in Austin, Texas. It's a city that's growing really well. While at the same time booking your side hustle growth around your main gig. Now, what you do is you could probably double your income. You could probably go from making $80,000 a year to making $160,000 a year and keeping more of it because now you're not living paycheck to paycheck. You're getting out of debt rapidly and you're actually able to grow while rebuilding your credit. See, consider this. If you're making $80,000
a year as an entrepreneur, you got to take off taxes for that plus the self-employment taxes, you're probably down to $55,000 a year. If you divide that by 12, you're sitting at 4,600 bucks a month approximately. And if I take out her $2,100 rent expense, she's down to $2,500 a month to pay for health insurance, travel, food expenses, uh, you know, personal life expenses, business expenses, growth expenses, whatever it is. To simply say, go make food at home and sell all your Robin Hood Bitcoin so you could pay off your debt is, in my opinion, a trap. And that's where we get to another lesson.
See, a big lesson that we frequently see, especially when I've given actual licensed financial advice to folks, what I find is that when people pay off or and she asked, she asked herself about it. She asked, "Hey, why don't I just consolidate all my credit cards and maybe I could lower my interest rate." What almost always happens to folks who are using like 89% of their credit utilization, their FICO scores are $593, they're sitting in $14,400 of debt. If they go liquidate all their Robin Hood and all their investments, which is what Caleb suggested, let's dump Bitcoin at 17,000, sell everything, and pay down the debt, what happens is people just go right back into debt. This is an income
problem. And this is what motivated me to make this video is I have a different outlook here. I actually think she has a serious income problem because even though she says she's making 80k a year, that's based on the good months and I don't know that it really averages out the bad months. She's probably making a lot less. Now, obviously Caleb has some really good advice here. Make sure you pay your taxes and you claim all of your Cash App income that you're getting. like don't hide that. You're going to get audited and you should pay for that. You should pay your taxes on that. You should report that. But here is another place where he kind of missed the benefit of paying your taxes. By paying
your taxes on that self-employment income in the future, you'll be able to qualify to buy real estate. Now, I know that's not the most sexy thing right now with interest rates, how high they are, but think about this for a moment. This individual by getting a W2 job would be able to increase her take-home pay by about six grand a month. She would be able to pay off all of her credit card debt in less than 2 and 1/2 months. And she doesn't have to be tied to this job forever. You could have a W2 job, get out of debt, try to grow your hustle business, get your own financial life in order, which frankly could enable you selling more clients to show people how you went through this transition. And
then you're rebuilding your credit, which now enables you to go to a bank and say, "Look, I got a W2 job. It's easy to qualify for a loan. I'm going to put 10% down because now I'm saving six grand a month. If I save 6 grand a month after my debt payoff for 2 years, that works out to $144,000 in savings after taxes. Now, I'm not saying that she would be that dedicated to saving. But even if she saved up $50 to $75,000, and bought a very small apartment or condo, don't go too big, something where she could get a 15-year mortgage, fixed rate, so she's not paying as much of this crazy high interest. Now, she could turn her life around. She could go from, I have a career and I have a side hustle
that I'm milking tax write offs in. So, I'm now writing off my car. I'm writing off my health insurance if my W2 job doesn't provide it. You could write off your health insurance as a um uh self-employment expense, which is an incredible loophole that most people don't take advantage of. And I think it's amazing. If your company isn't providing health insurance, you should have a side hustle so at least you could write off your health insurance through it. And rather than just having a bandage and say, "Let's sell all our investments and pay off our debt because we expect she's going to go right back into debt." Why not actually build into the role model of exactly what you're trying to sell as a life coach? Now, I know a lot of this
is like, ah, but Kevin, now I have to go from working, you know, a few hours a day to actually having a full-time job and then I'll have to work on the weekend. But a lot of folks in this situation, they don't have children. They don't have a spouse or family members or parents they have to take care of yet. And I'm not trying to speak for everybody, but when you're 27 years old, at least from what we learned from her, she's not in the position where she's got all of those extra obligations. She has the time to generate that value for herself. And if she generates that value for herself, pays down debt, rebuilds credits, uh her credit, buys a place with a 15-year mortgage, prioritizes her income, all of
her problems get solved. Yes, she has negative equity in her car of $15,000, but she's got a 2020 RAV 4 or 2019, I can't exactly remember. She'll recover on the credit. She could probably refinance it down to a lower and better rate over time. Although, usually you can't refinance if you're upside down, whatever. Just pay it off with this extra income in the future. And now you can actually afford to not feel guilty about going out and buying a bowl at Chipotle. I'm tired of people saying, "Oh, you're broke and drowning in credit card debt. You know what? You need to save that 20 bucks on that burrito bowl because that's going to make you happier." No, it's not. It's not going
to make you happier. You're going to be just as miserable as you were before. Yeah, it always ends up circling back into debt. And so yes, minimizing expenses and minimizing debt is important, but if we can actually get ahead in life by grinding, that's the first thing we should do. The vast majority of cases, the very first thing we should do is focus on what can we do to boost that income. And even if you can't get an 80K job right out of the gate, it's worth starting somewhere on a W2 and working your way up because it's better than sitting around at home and being miserable. Now, if you like this kind of content, I'm down to make more of these Caleb breakdowns where what I do is I'll listen to the hour segment
for you. I'll take notes on it. I'll give my pointers and my perspective on the insight. This isn't designed to replace you or prevent you from watching the drama or the entertainment that's involved in the Caleb Hammer videos. I highly encourage you check those out. They're very entertaining. It's designed for people who are trying to get some good bottom line insight into potentially how they could improve their life. And so, I'm going to be matterof fact here. I'm going to give it to you straight. I'll give you my opinion. And whether or not you like it, hopefully you can take little bits and pieces. You don't have to like all of it. Consider subscribing and we'll see you in the
next one. In fact, leave me a comment down below of which video I should break down. Why not advertise these things that you told us here? I feel like nobody else knows about this. We'll we'll try a little advertising and see how it goes. Congratulations, man. You have done so much. People love you. People look up to Kevin Praath there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.
