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This spiritual coach needs a financial coach

Generating income isn’t Rachel’s key issue. She’s a bonafide entrepreneur who has managed to create a successful business in just a few years.

Rachel started working as a spiritual coach in 2020. Her work involves in-person and online coaching and workshops. Essentially, she doles out life advice for a living. It’s not a time-consuming profession — Rachel claims it takes just five hours a day — but it’s certainly lucrative. She claims to be earning $6,500 a month on average.

Ramping up a business to roughly $78,000 in annual gross revenue is commendable. Unfortunately, Rachel also got her first credit card two years ago and has been on a spending binge while growing her business. Simply put, she’s experienced lifestyle creep and is now struggling to keep up with her debt.

Hammer dove into her finances and found that she regularly uses nearly maxed-out cards and spends more than she pays back monthly.

She also has a $29,000 car loan. The payments are roughly $534 a month. By Hammer’s estimates, Rachel spends roughly one-third of her take-home pay on minimum payments for all her debt and barely has any money left over after paying her “stupid expensive rent.”

Rachel isn’t alone: 48.7% of Americans earning over $100,000 a year said they were still living paycheck to paycheck, according to a survey by PYMNTS and LendingClub. The rising cost of living coupled with a tendency to spend more than they earn has put many Americans on a financial cliff edge.

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Options for getting out of debt

Based on Hammer’s calculations, Rachel requires around $4,000 to meet her basic living expenses and unavoidable costs. Assuming she makes $6,500 on average every month, she could use what’s left over ($2,500) toward her nearly maxed-out credit cards and pay down her debt.

To do this, she needs to severely cut back on shopping and shop for groceries instead of eating out.

“After about six months of no joy in your life … you have no more credit card debt. Incredible!” Hammer exclaimed.

He believes another four months on this budget should help her accumulate $10,000 to buy a cheap car and sell her existing car to eliminate the auto loan.

These steps should put Rachel in a much stronger financial position in less than a year.

However, aggressively cutting back on spending isn’t her only option.

Rachel is fortunate enough to have room for more work. Since she spends just five hours a day as a spiritual coach, she could increase her income by working part-time or even full-time elsewhere or performing a side hustle. This would allow her to pay off her debt more quickly.

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About the Author

Vishesh Raisinghani

Vishesh Raisinghani

Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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