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thought Chuck should try to pay $3,000 a month to his debt elimination plan and $4,000 a month to his wealth
account. This would require $86,000 a year. Additionally, Chuck wanted $1,000 a month in cash flow, which made
a grand total of $98,000. Chuck’s teacher’s salary would still cover his expenses, and his entity structuring would
help him better manage his expenses to retain more of his income. Given that Chuck had no assets on which he
could rely, I thought a goal for the Cash Machine of $100,000 would be challenging but worthwhile. He needed to
make $8,333 a month. As Chuck ramped up, he found several more colleagues in a variety of teaching fields looking
to be hired and 100 students a week willing to pay them. He was able to increase his hourly fee to $50 an hour,
which made his weekly gross $5,000. Chuck took half of this, for a total of $10,000 a month.
For Entities , Chuck established an S corporation for his business. Later, we’d create an LLC for his investment
opportunities. Chuck had the idea to create tutoring aids and sell these products under a C corporation, so we would
establish this as well.
“For someone who is burnt out, you sure have a lot of energy,” I said.
“This is fun,” he said. “I’m not even sure I want to run a bar anymore.”
Numbers being his thing, Forecasting was no problem. Chuck set up a very well organized chart of accounts, and
because of his new business, he was able to shift some personal expenses into his LLC. This included the part of his
rent and utilities that covered his home office, as well as his payments for the company car.

And with his Debt Management plan in motion, Chuck’s looming debt would not be looming for long. The
capitalist world is divided into two camps: those who pay interest and those who get paid interest. If you have
consumer debt, you’re in the wrong camp. Compound interest is a wonderful thing, but only when it’s working for
you, not against you.
Getting Out of Debt: Bad-Idea Approaches

The following are options for getting out of debt that are less than optimal.

Credit Card Calculus
STRATEGY : To transfer debt from a high-interest-rate credit card to a lower-interest-rate credit card.
COMMON RESULT : After making balance transfers, cardholders usually lose no time in running up their
original high-interest cards again. I am amazed by the commitment of time and energy that people put into
rotating their credit cards. I can only imagine the success some of the people who do this would have if they
put that same creativity and effort into building their passive income. If you are smart enough to play this
game, you are smart enough to invest.

Home Equity Loans
STRATEGY : Refinance the home to consolidate debt.
COMMON RESULT : Too many people don’t control their spending, borrow more after they refinance, incur
more credit card debt and refinance again. Serial refinancers use up all the equity they build and then get
boxed out of, or are charged exorbitant interest rates for, additional credit. In many cases, the home that was
once a nest egg shuffles off to the brink of foreclosure.

Consolidating Debt
STRATEGY : Allowing a debt-consolidating company to take all of your debt and collapse it into a single, very