Case Study: Big Dreams With Big Debt

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Hey y’all! It’s Friday, so you know what that means…READER CASE TIME.

Now, because we have a MASSIVE reader case backlog, we tend to be pretty selective. We only want to feature the cases that we believe will help the most number of people. So when we first looked at this reader case and saw the words “actively seeking to invest in cryptocurrencies,” my first instinct was to throw up my hands and go “Forget it. This guy’s toast.”

But as I read farther, I was surprised to find that even though this reader’s situation seems dire, when you MathShitUp, you can end up surprising even yourself.

Check it:

Hey Guys,

We are looking to make some overdue adjustments to our long-term financial vision. We’ve basically always made it with what we’ve had but we’re ready to scale up strategically and like your approach. It would be hugely helpful to have your perspective as we set ourselves up for an even more enjoyable life. Currently, I am launching a recreational camper vehicle business in addition to my full-time work as a designer. My wife is an herbalist and medicine maker working with a start-up.

We are actively seeking to invest in cryptocurrencies and a potential rental income generator in Hawaii where we’re living, a liability but it seems buying is cheaper than renting out here.

Gross – $66,600
Net – $51,400

IRS – $32k %4
Student Loan – $19,845 @ %6.8, Monthly payments $178.00
Student Loan (private) – $15,000, currently in default
CC – $600
Subaru $301

Small Business Loan
Lending Club $6000
Subaru $342

Gross – $38,400
Net – $30,000

Student loans $18,300, currently in default

Family spending (including rent, rotating bills, groceries, gas, etc.)
Monthly, $3,000

Fixed assets
Furniture – $3,000

General savings $25,122
Betterment investing $300/mo, currently $2,000 total
Acorn investing , currently $905
Health Savings Account $1700
Fidelity (a few stocks) $2,373
Betterment $4500
Crypto $5,000

Any thoughts would be great, we’re looking forward to having more clarity and less stress around our financial future and more importantly, a happy life!

P.S we’re house sitting this month until Sept, got a little break from Rent.

In Gratitude,


The big thing that jumped out at me was this:

IRS – $32k %4
Student Loan – $19,845 @ %6.8, Monthly payments $178.00
Student Loan (private) – $15,000, currently in default
CC – $600
Subaru $301

Small Business Loan
Lending Club $6000
Subaru $342


Student loans $18,300, currently in default

Eep. First of all, that is a LOT of debt. $92,388 to be exact. And not only that, 2 of the student loans are already in default! Meaning that they can’t even take advantage of the student loan forgiveness programs we wrote about. AND an IRS loan of $32k from unpaid taxes? Also, a Subaru debt? What does that even mean? Is it a car loan? If so, what car loans are only $301?

So suffice it to say there was lots to NOT like about this reader case. But then, there were some things that I did like, namely…

Currently, I am launching a recreational camper vehicle business in addition to my full-time work


P.S we’re house sitting this month until Sept, got a little break from Rent.

An entrepreneur and someone willing to sacrifice for his dreams. I like that. My inbox is crammed full of “My income is high, but my mortgage payment is so much higher and my life is so hard, wah wah wah” people that it just makes me want to puke. This guy, though, I like the cut of his jib.

So first of all, what do we see here?

Well first of all, he’s making a common, yet cardinal mistake with his finances, which is attempting to invest when he’s up to his eyeballs in debt.

People, if you are carrying debt, DO NOT INVEST. It’s not worth it. An investor won’t be able to outpace the interest rate on their loan, especially considering that investment gains are taxed and debt has to be paid with after-tax money.

And second of all, he’s trying to invest in crypto?!? With debt outstanding? Look, I get that alternative investing strategies can sometimes sound sexy, but with your numbers, you need to sell right the Hell now. Do NOT be part of the #hodlgang.


So anyway, if we liquidate all his investments (aside from the HSA, since you can’t spend that on anything aside from health related costs), we will raise $39,900. Let’s say we leave $6000 in cash (the amount of his business loan) assuming he needs that for his camper van business. That leaves us $33,900. That’s enough to eliminate the 2 in-default student loans plus the credit card debt. This puts him on much more solid ground. He’s still sitting on $58,488 in debt, but at least none of it’s in default. So now he’s in “normal” amounts of trouble rather than “uh-oh, you’re going to go bankrupt” trouble.

So now what? He’s still got a lot of debt, but is there any hope to get out? Well to answer that, let’s look at his spending.

Together, him and his wife make $51,000 + $30,000 = $81,000 after tax. His spending is $3000 a month, or $36,000 a year. That gives him a 56% savings rate!

Now we’re talking. He’s saving $45,000 a year after-tax. We can work with that.

That means he’s only a year and a bit from completely eliminating his debt, including that scary student debt @ 7% and that even scarier IRS debt (you’re gonna want to pay that off. Those guys don’t mess around). Also that weird $643 Subaru debt, whatever the Hell that is.

After that debt is gone, how far away is he from FI? Well let’s see…

With an annual spending of $36,000, he’ll need $900,000 to retire. How long will it take to get there? Well according to my handy-dandy spreadsheets…


13 years. Add one more at the beginning to clear out his debt, and we’re talking about 14 years. That ain’t bad at all!

And this is, of course, assuming his entrepreneurial activities go nowhere. If it starts making money after a few years, this could drastically cut his time to retirement, especially if it’s something he can continue to do as a part-time side-hustle after he leaves his normal job. As we’ve mentioned before, side hustle income can drastically cut the amount of time necessary to retire.

For argument’s sake, let’s say that after 2 years this camper van business of his starts pulling in just $10,000 a year after tax. That doesn’t seem so crazy, right? Let’s see what that does to his numbers.

Well first of all, if it’s enjoyable and low-maintenance enough that you wouldn’t mind continuing to do it after leaving your full-time job, that brings your portfolio target down to ($36,000 – $10,000) x 25 = $650,000. So that target just got a lot closer.

And on top of that, that extra $10,000 adds to his savings rate every year. This is what my spreadsheets look like now.


9 years. Add back the one year to clear the debt, and we’re talking about retirement in 10 years. That’s how much effect an extra $10,000 can have.

Now, I’m not claiming here that it’s easy to make $10,000 a year starting a business. I’ve tried starting many many businesses and the vast majority of them earned precisely $0. Nor do I know anything about camper vans. But if he can make that work, he could be done in just 10 years.

Heck, even if he doesn’t he’s done in 14. That’s not bad at all. Lots of readers who write in are in a way worse predicament because their spending is out of control (or they, *sigh* bought an overpriced house). As long as BigDreamsBigDebt keeps a handle on his spending, and doesn’t get into more debt, he’s gonna be OK.

Side Note About Crypto

Oh and one last note about crypto. Out of a sense of morbid curiosity, I’ve been poking around in the crypto space and learning how this stuff works over the past few months, and my biggest conclusion in this asset class is that it’s freaking scary. The vast majority of people holding crypto seem to fall into these groups:

  1. Drug Dealers
  2. Gamblers/Speculators
  3. Hackers

This is not a form of currency you want to hold (or “hodl”) in any significant amounts. It’s also completely unregulated and surprisingly easy to hack/steal. If you keep your bitcoins on a web wallet or your phone as most people do, a seemingly innocuous action like connecting to a public wifi hotspot or accepting a friend request from someone you don’t know on FB can give hackers enough information about you to completely steal your shit. And once your crypto has been stolen, it’s gone. You can never get it back, and the FBI won’t bother investigating it since they don’t consider crypto real money.

You can wax poetic about how it’s the future of currency and all that, but for all of crypto’s promises of anonymity and security, there’s a surprising amount of rampant thievery going on in this space. For that reason, I’m not touching it with a ten foot pole and neither should any reader of this blog.


But enough about crypto. What are you thoughts on BigDreamsBigDebt? Let’s hear it in the comments below!

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40 thoughts on “Case Study: Big Dreams With Big Debt”

  1. That’s awesome to really see the full picture at the forefront. Without any additional income from a side hustle and his a millionaire in less than 15 years… That’s pretty cool! All he has to do is stick with the plan!

    Also, I’m willing to bet, the side hustle will generate income within a couple years. Things aren’t really as gloomy as they look sometimes

  2. A little concerned about the financial discipline going forward knowing they have two loans in default! How did they let that happen? They make enough to cover the minimum payments, don’t they?
    And Crypto??? Really!
    Maybe I skipped over it but how old are they? No plan to have kid(s)?

    1. Thanks for your review of our situation Wanderer. It’s refreshing to see what’s possible with hugely diligent efforts and yes, discipline has been a big opportunity here. To clarify a couple of things, the Subaru costs are lease payments, both of which we plan to keep and finance. One of them is intended for the camper business. Of the three student loans, one remains in default and we’re working on that, another is in the loan forgiveness program until September and we’ll see from there. We are thinking to pay down the largest student loan by selling our crypto and using a portion of our general savings to bring that balance to $10k immediately then following with monthly $2,500 payments until paid off by Fall of this year. At that time we’ll begin the IRS payments, that monthly amount is currently unknown. We’re considering continuing housesitting or other creative means to live to keep the rent factor minimal while we focus on reducing our debt. Eventually, we plan to buy a home with a VA loan, we’re in our mid-30’s and yes, a kid is a possibility. We are motivated to make this happen and appreciate the encouragement and reflections as we shift this financial paradigm!

  3. The biggest problem right now is the discipline to fix the problem. They will have to make some sacrifice up front to pay off those debts. It’s going to be tough for a few years, but once they get through it, life should be much easier.
    I agree with paying off most of the debt first. Maybe they can consolidate to a lower rate somehow.
    Job 1 is turning it around. Good luck!

  4. Nice write up Wanderer. You’re absolutely right of course — they need to kill that debt first.

    The way I see it, this is a couple at the very beginning of their financial independence journey… (starting a little below zero, but let’s not quibble over fine hairs.)

    14 years is quite a long time. It takes discipline to save 50% consistently for 14 years. Knowing what we do about this person (credit card debt, irs debt, car debt) do they stand out as disciplined?

    It’s not my first impression. Discipline didn’t get these folks $92k in debt.

  5. Sorry but two red flags in the loan default and interest in crypto. That said, they obviously reached out and want to make changes. Awesome. I also love the Hawaii life. Aloha. Best of luck to them.

  6. Nice article Wanderer, surprising outcome! I like your point about not investing while carrying debt, though I think an exception would be if you have a company matching retirement plan. Hard to beat 100% return 🙂

  7. I started panicking reading about the debt and only started breathing when I saw the numbers and the fact that they can retire in just 14 years if they stick to the plan. That sounds amazing. Hurray for that and good luck to them. Everybody deserves that kind of happiness.

    On a side note, I think what FC and wanderer are doing is amazing. Lately, I’ve been reading your blog on a daily basis and it feels so good to be a part of a community of like minded people who want to turn their life around, save and retire early. So thank you for sharing your knowledge and for helping others plan to achieve their dream!

  8. I’ll throw my 2 cents in here and say I agree with the other posters regarding a perceived lack of discipline to making it to FI for these folks. Hope they can right the ship but honestly, their all over the place. They’ve got too many irons in the fire = new business, buying a house, current loans in default with the a crypto chaser which makes me question if FI is doable for them. I hope I’m proved wrong when they come back in a year (after they’ve eliminated the IRS, Student Loan and credit card debt) and give me the finger. (Maybe I’m just jealous they live in Hawaii)

  9. Yes. Mighty Investor agrees. Cryptocurrency investors are either a) professional speculators or b) suckers. We fall into one or the other category–or avoid this asset class altogether.

    It is really that simple….

  10. At first this doesn’t look good at all. BUT, even if they are all over the place and made some bad choices in the past, if they see in how little time they could retire, that could be highly motivating. Yay for mathing shit up! I’m curious how old they are too.

  11. Yup, if you’re in heavy high interest debt, pay it off first… Get stable income and let the dust settle before looking into investments.

    Though I have different opinion on crypto. Technically, I believe cryptos has a future and banks and financial institutions are in fomo. Regulations will probably remove a bunch of crap coins, but cryptos are be part of future technology. I’m sure many big players, governing agencies are afraid.

    I’m still investigating which crypto is the most promising. Just have to buy in deep fear (potentially now?) and sell when you feel like a genius. Totally against emotions, but can’t buy because you have fomo and sell because you feel like crap

    1. I agree on the crypto front, we currently own Ether and Ripple, those two seem to have solid blockchain tech backing them up.

      1. How do you figure one coin is better than another? They’re doing altcoin ICOs so often now that they run the risk of saturating the entire space, and every bloody altcoin sounds the same!

        1. It’s speculation. I don’t have a crystal ball. But I try to look at the team, their support from different agencies, adoption. Trying to read their whitepapers might help

          Attending their recruitment events also help you understand their growth, and where people are heading in the job market.

          There’s always the risk. But it’s a downside vs upside speculation. Have to calculate the risk and invest at a comfortable level.

  12. Right on the money, but the thinking has to change, lets see what happens in a few months.

    Crypto is a get rich quick scheme, that amount could be put toward debt on the credit card and the relative return is 18% compounded, guaranteed. this is how I see debt, its like a BOND in reverse, pay it off now. You will never get rich, paying interest to someone else.

    Consolidate the debt, there are usually debt service companies to help, and some will even negotiate forgiveness terms that don’t damage your credit rating, and you can almost always get a lower interest rate and better payment schedule. Then, PAY IT OFF, with a vengeance. Once your done, 2 years from now, funnel that same payment into a
    balanced ETF portfolio, and your on your way. Now you are collecting interest, not paying it to someone else.


  13. I’m not buying that their spending is as low as they say. If they are actually saving 50+% of their income, how is it that they have so much debt and loans in default? Where is all that money going? It’s clearly not going towards their debt payments, so I’m skeptical that we’re getting an accurate picture here.
    Like other commenters have said, I’d love to be proven wrong. I don’t wish a debt-saddled paycheck-to-paycheck life on anyone.
    Walking the path to FI requires big, heavy Discipline Boots (patent pending), and I wish these two much success.

  14. Wanted to point out IRS debt is hardly 4%. Yes the interest rate is 4%…but that’s not counting Failure to Pay(there is also failure to file, failure to make ES). Failure to Pay penalty can be up to 25%. See this link:

    Here’s the short of it”… The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.”

  15. It was really refreshing to see how getting out of that much debt might be possible. I’m curious to see what they decide to do. Cashing out investment I imagine might be hard. I’d like to think if it were me, I’d rather keep the investments and add 2 years of repayment. Another reader case that did not disappoint! Keep it up!

  16. Completely agree with the sentiment about paying off debt before investing. Assuming the interest is higher than returns on investments, it’s a guaranteed higher net-benefit to pay off the debt faster.

    Glad to see the reader case back. I like the travel articles as I take notes on what to do when I will travel. But I LOVE the reader cases 🙂

  17. I love this case but have a slightly different suggestion with regard to the debt. They need to use their cash savings to pay off the ENTIRE IRS debt immediately. Like, this week. As a previous poster pointed out, the penalties are way higher than the interest rate alone (though those already may be incurred and rolled into the total due). Still, having the IRS off my back would be more of a priority to me than paying off a student loan – especially since those are discharged in case of death or disability (not so with the IRS).

    Of course wiping out the cash savings will feel scary, but that will just serve as motivation to build it back up asap. If they are really living on half their net pay, then getting current with the student loans should be a snap. Getting current and paying off the IRS should be done BEFORE plowing $6k or any other amount into a new business. If you want a side hustle fine, but pick one without steep start up costs until you get your current shit in order. Otherwise you’re just adding fuel to your debt fire.

    Good luck!

  18. #Debtlgang #Debtlgang #Debtlgang

    Love reading these! Thanks, Wandererer (You know you have two ‘er’s at the end of your name right?). #Wanderganger

    I’m also living vicariously through your travel series. #Save-lgang won’t let me travel until I #Retire-lgang. But also I don’t really like traveling 🙂 Prefer just to see the best of it through your photos and avoid the exhausting parts of it.

  19. There are some key takeaways in all the numbers.
    1. Eliminate debt – first.
    2. Invest the savings regularly.
    3. Restrict expenses to necessary things
    4. Live below one’s means
    5. Supplementary income & compounding accelerates FI.

  20. I agree PARTLY with other people’s concerns regarding the lack of discipline. Wanderer’s plan of attack requires serious financial discipline, and nobody with financial discipline ends up with $32,000 of IRS debt.

    BUT this isn’t some sob story Wanderer read about in the paper. These people reached out to him and FIRECracker. That shows me a willingness to buckle down and get back on track. That doesn’t mean that suddenly they have financial discipline, but it does show the level of self-awareness necessary to begin the changing process. Similar to an alcoholic admitting he has a problem.

    We can only wait and see what happens.

    ARB–Angry Retail Banker

  21. The problem with all of these examples is the answer is not realistic. People’s expenses continue to increase due to inflation, adding kids, replacement of items such as cars, rent increases if you don’t own. (
    This is one big factor that is consistently missing when you encourage people not to own. At some point if you own a house and are diligent in paying off your mortgage you can live rent free. If you are a long term renter you have that payment for life and are at the mercy of your landlord increasing rent or kicking you out.

    To think in 14 years they can still live off 3k a month is rediculous.

  22. Your analysis is spot on – except the letter writer is not giving you the full picture. They are spending way more than $3000/month. The letter writer didn’t mention their $150 cable bill, $300/week restaurant habit, $100/week crack habit ….
    The letter writer can’t even admit the extent of their problem in an anonymous email.

    I hope that I am wrong, but I put the chances of them becoming a millionaire in 14 years near zero. I would bet 1 BTC that they will still be underwater in 14 years. What is the real story?

    Btw Love the blog!

  23. I dream of growing my business so that it becomes a large company. I don’t know if there are such chances now, because there is competition in almost all areas of business.

  24. Competition is not always bad. This often creates an additional incentive for promotion. So, decide on a marketing strategy in advance, finding experienced specialists and all that. In addition, there are now many tools for effective promotion, including e-mail. Read more about smtp secure ports, as well as about correctly setting up the system for sending and receiving emails to avoid various problems when running campaigns.

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