Choosing an unconventional career probably requires a wider safety net than others. Earnings can be unpredictable and taxes can be more complex. Unfortunately, many self-employed people do not value financial security and compound the problem with poor decisions and uncontrolled spending.
Krista, 33, found herself in exactly that position. On a recent episode of her Financial Audit with YouTuber Caleb Hammer, she talked about her struggles with debt, her career as an exotic dancer, and her monthly Veterans Affairs (VA) disability. He talked about his dependence on employee allowances.
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“Uncle Sam is my favorite sugar daddy,” she told Ms. Hammer, describing her fascinating journey from the Navy to strip clubs. Hammer called it “one of the wildest situations I've ever seen.”
Unfortunately, a combination of current economic conditions, taxes, and unstable incomes are putting more Americans in similar dire straits.
pushed to the edge
Rising costs of living have led more people to work in precarious or stressful jobs. According to a recent report by PYMNT, 23% of consumers take on side hustles to earn extra income.
Income from side gigs can be volatile and unpredictable. It's also much more complex to deal with at tax time. H&R Block says gig workers may not know how much tax they pay throughout the year and are at high risk of falling behind.
Christa's tax problems stem from this lack of awareness. Her income is very unstable, fluctuating from just $4,000 a month in the summer to $5,000 a month, and in November up to $13,000 a month. She is not sure about her own tax liability, but she estimates that in her previous tax year she owed $60,000 and this year she owed $40,000, for a total of $100,000. Masu.
“I've been avoiding them,” she told Hammer. “Are you an accountant or an IRS agent?'' he asked, and she replied, “Both.''
Fortunately, Krista has served in the U.S. Navy for six years, which provides her with medical insurance and disability benefits of about $2,000 per month. That would stabilize her monthly income to some extent, but her bad spending habits pushed her further into debt.
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wrong spending decisions
Krista's spending habits exacerbated her financial problems. She had breast implants, but she doesn't know if they can be written off as taxes. She purchased a property in Arizona and is renovating it as a short-term rental. Her outstanding balance in this case is $60,187.
The home was financed by the property seller at a 10% interest rate, but Krista believed the interest rate was only 5% when she bought the home.
“Didn't you see what you applied for?” Hammer asked her.
Meanwhile, the cost of renovating the premises was covered by her credit card. She is very close to her $10,000 credit limit on that card. To make matters worse, Krista decides to apply for her personal loan at 15% interest to reduce her monthly payments. She said: “I used it to settle my debts, but I didn't do a very good job because I still have debts.'' [debt],” she said.
This is just the tip of the debt iceberg. Krista has consumer debt totaling $59,085, and his monthly payments are $2,103.
“You dug a hole over a hole,” Hammer told her.
Data released by the Federal Reserve Bank of New York shows that many Americans are in a similar situation as consumer debt has continued to rise in recent months. As of the third quarter of 2023, credit card balances totaled a whopping $1.08 trillion. With interest rates rising, borrowers like Krista are finding it increasingly difficult to dig themselves out of this widening hole.
However, there are options to get out of the debt pile. Krista was on the right track by following her intuition to consolidate her debt at a single, lower interest rate. However, you can't just take out another loan and hope for the best.
If you don't create (or follow) a household budget plan that includes debt repayments, you can easily get stuck in a cycle of debt. If, like Krista, you've been putting off dealing with your financial turmoil, it may make sense to talk to a qualified financial professional to get you back on track. With a little guidance, you may find that no hole is too deep to climb out of.
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.
