Josh's wealth plan: pay off $38,000 of card debt first, then target $78,400 in year one

Disclaimer: This is education, not tax, legal or financial advice. Every figure below is a target written into Josh's plan, not a result. Talk to a qualified professional before you act on any of it.

Who this plan is for

Josh is a 1099 contractor who runs a handyman LLC in the Lancaster area. He earns $104,400 a year. He has a son, and the plan looks at buying a home near his son's school later on.

His income is solid, but debt eats it. He owes $38,000 on credit cards at 18% to 29% APR and $25,000 on auto loans. His monthly costs run about $8,000, so little is left over each month.

He does have one big asset. His home is worth $405,000 and he owes $224,000 on the mortgage, which leaves about $180,000 of equity. The plan's goal is a full turnaround in 12 to 18 months, and cash flow comes first.

What the plan targets in year one

The totals also count an investment income sleeve ($2,000 to $7,000) and Bitcoin upside the plan calls illustrative ($1,500 to $3,000). This is the plan's own estimate. It mixes interest saved, spending cut, new side income, tax saved and investment gains. It is a target, not money Josh has made. Some lines also assume a full year at a steady pace, even though the arbitrage unit is not set to start until month 6.

The plan, step by step

1. Move the card debt to a HELOC

A HELOC is a line of credit backed by the equity in a home. The plan has Josh open a $50,000 to $75,000 line and use it to pay off all $38,000 of card balances at once. The rate drops from 18% to 29% down to about 8% to 10%, and it is variable. He freezes the cards, keeps one with a $1,000 limit for his credit score, and aims to pay $2,000 to $3,000 a month toward the line until it is gone. The plan puts the interest saved at $7,000 to $10,000 in year one. More on this in our HELOC strategy guide.

2. Cut spending and build a cushion

The plan targets $500 to $800 a month in cuts, mostly from eating out, subscriptions, insurance, utilities and entertainment. A 50/30/20 budget in an app like Monarch or YNAB, with separate Bills, Spend and Safety accounts, keeps the cuts in place. In month 4, Josh refinances or pays down the auto loan. The emergency fund starts at $5,000 and grows to 3 months of expenses once the HELOC is paid off.

3. Use the LLC for tax savings

Josh's LLC opens doors a W-2 job does not. An accountable plan lets the LLC pay him back, tax-free, for the business share of his phone, internet, home office, mileage and tools. The Augusta rule lets him rent his home to the LLC for up to 14 days a year, about $2,800 at $200 a day. Once income is steady, a Solo 401(k) lets him save much more for retirement before tax. The plan puts these tax moves at $13,000 to $20,000 or more in year one. In month 2, he also opens vendor accounts to start building business credit.

4. Start cohosting, then add one arbitrage unit

Cohosting means running Airbnb listings for owners for a share of the revenue, here 20% of gross. It needs almost no cash, just tools under $100 a month. The plan has Josh reach out to 20 owners in the Lancaster area and sign 1 to 2 clients at $300 to $800 a month each.

Then, around month 6, if cash and city rules line up, he leases one place and rents it out on Airbnb with the landlord's written OK. That is Airbnb arbitrage. It costs $5,000 to $7,000 to launch and targets $700 to $1,000 a month after costs.

5. Buy Bitcoin on a schedule

The plan starts Josh at $250 a month in Bitcoin from month 1. That rises to $500 to $750 a month after the HELOC is paid off and the first cohost client signs. Over time, 30% of free cash flow goes to Bitcoin, with no cap. Any other crypto he holds moves 90% to 95% into Bitcoin. Once that is running smoothly, the plan adds an optional $25,000 to $50,000 income sleeve in MSTY, IMST or STRC inside a retirement account.

6. Scout a house hack for later

The last step reaches past year one. Josh looks for a duplex or a home with a rentable suite near his son's school. The suite could rent for $1,000 to $1,250 a month, and his handyman skills could cut $10,000 to $20,000 from renovation costs. This step is not in the year-one numbers.

What has to go right

• The HELOC. Josh has to qualify for it. The rate is variable, and the debt is now tied to his home. The plan only works if the cards stay paid off.
• Side income on time. The plan counts on a first cohost client within about 60 days of outreach, and an arbitrage unit around month 6 with landlord permission and city rules that allow it.
• Investments that can fall. Bitcoin and the income funds can drop in value, and their income is not guaranteed. The plan treats Bitcoin as long-term savings.

What to take from this

Josh's plan is about order. It fixes the most expensive debt first, frees up cash each month, then adds side income and investments. The $47,500 to $78,400 is a year-one target that mixes savings, side income and tax. It is not a paycheck.

Results depend on Josh following through, month by month. A CPA should check the tax moves before he uses them, and anyone in a similar spot should run their own numbers first.