Kicking the can down the road
Lee earns a living as an online content creator. She’s managed to amass a sizable audience through streaming platforms such as Twitch, TikTok, Instagram Reels and YouTube. Income from all these sources combined is between $4,000 and $6,000 a month, based on her estimates.
Her income isn’t extraordinary, but the fact that it’s generated entirely from online content creation puts Lee in an exclusive club: 72% of online content creators earn less than $500 over the course of a year, while only two percent made more than $50,000, according to Linktree’s Creator Report 2023.
Despite her precarious income, Lee has locked herself into serious debt. Her monthly interest payments total $983. “[Sometimes] I get a lot of money and I pay off all my [credit] cards,” she says. “Cool, I’m not going to run these up again, and then I do!”
She also owes money to the IRS, but says she prioritized other expenses instead. “Everyone around me [says] it’s okay, I don’t pay taxes either,” she says. “I’m only two years behind, and I’m taking care of it now.”
Hammer believes she’s just delaying the inevitable. “‘I’ll figure [it] out’ is a kick-the-can-down-the-road-forever until we die on a Walmart floor thing,” he says.
The good news is that Lee is still young and has plenty of time to catch up.
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Benefits of compound growth
Hammer believes Lee has “the best decade of compound growth in your life” ahead. Lee could “easily [be] a millionaire, but not the way you’re doing it.”
A person who starts saving and investing $10,000 a year can end up with over $2 million more by the age of 60 if she starts when she’s 20 rather than 30 years old, assuming 10% annual returns.
This is why even legendary investor Warren Buffett attributed his success to getting started early.
Unfortunately, Lee isn’t benefiting from this, because instead of investing she has tax bills and a debt burden to deal with. Her total debt is $46,490.
Hammer recommends she consolidate all her credit cards to manage that debt. He also recommends she get rid of her car (a Land Rover), pay her taxes on time and hire a professional accountant to help her claim tax write-offs on business-related expenses.
She also needs a tight monthly budget and a few months to save up an emergency fund. If done right, that should put her in a position to start investing and compounding her wealth.
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