From Debt to Freedom


A decade ago I was in a lot of debt. Not the “Wow, my mortgage is big” or “Look at my fancy new car” kind of debt, more like the nasty “Wow, 22% APR adds up quick” and “Look at this new letter from the IRS” kind. It all added up to nearly a year’s worth of income for me at the time. It was bad.

But I know how to work hard, and I was lucky enough to find decent work which allowed my hard work to pay off all my credit cards, tax penalties, vehicle loan, etc. The day I paid the last of it all off was a very, very good day indeed. Whew!

Now I’m not rich, and have never been in danger of becoming rich. I’m more interested in freedom, and rich can only buy so much of that. Since achieving my debt-free goal, I have been making steady progress toward additional freedom for a few years now.

Progress requires that we:
  1. decide specifically what we’re working towards
  2. have a way to tell when we’re going off track
  3. know when we’ve arrived where we were going

This is a quick guide to help with that. But don’t just take it as gospel and run with it, please. Let it inspire you to make your own version! While I did make this myself, I didn’t make it all up from scratch. I put together from a variety of sources. I’m happy to answer any questions you may have for clarification purposes, please use the comments for this. And if you don’t like something, please just change it. No arguments or permission needed from me! Admittedly, even I have skipped around a bit, though I’m now happily cranking away at Stage 5 :)

This assumes that the reader is a healthy, American, renter who drives a car and has a job, has 4 or less dependents, and has the minimal government required healthcare & automotive insurance. If not, it may be easier/harder for you, please adjust as needed.

Pre-requisite Step: Set retirement trigger

Your retirement trigger is your annual living expenses x 25 (aka “Safe Withdrawal Rate”) In other words, once your living expenses are 4% of your savings, you win! Thanks to compounding interest, you don’t have to work anymore unless you want to. What does that look like?
  • $20k/yr living expenses = $500k invested
  • $40k/yr living expenses = $1M invested
  • $60k/yr living expenses = $1.5M invested
  • $80k/yr living expenses = $2M invested
  • $100k/yr living expenses = $2.5M invested
  • $120k/yr living expenses = $3M invested
  • $140k/yr living expenses = $3.5M invested
  • $160k/yr living expenses = $4M invested
  • $180k/yr living expenses = $4.5M invested
  • $200k/yr living expenses = $5M invested

Etc. etc., just multiply by 25! Although above that, you either have a loose definition of living expenses or you’re already likely rich enough not to need this guide anymore. In any case, figure your living expenses out and multiply by 25. You too can do this math. Once you have your baseline living expense and retirement numbers, you’re ready to get started.

Step 1. Catch up

Reduce and consolidate your expenses until you and your family can live on 50% of the household’s take-home pay. I know you think you can’t, but in actuality you totally can! Plenty of other folks who are not as smart or talented or pretty as you have done this. You don’t have to do it all at once, and you don’t have to do it for forever. But you do have to do something to catch up to current, and that means using a lot less than you have for a little while at least.
  • stop incurring new debt
  • pay off all old debt
  • pay all taxes & bills on time
  • remove anything that tempts you to overspend (credit cards, advertisements, etc.)
  • switch from big bank to local credit union, because duh
  • get a valid passport, if you don’t have one yet

Step 2. Insurance against life’s surprises

  • re-optimize annual living expenses, they probably went up after Step 1
  • automate minimum payment of all possible bills, eliminating late fees
  • apply for line of credit for overdraft protection, eliminating overage fees
  • if your employer has matching savings plan, sign up and max it out
  • revisit existing insurance plans (are they enough?)
  • get disability/rental/life insurance, as needed
  • establish Health Savings Account (HSA), if possible
  • set aside one month’s living expenses, preferrably at a different credit union
  • set aside one month’s living expenses in emergency cash, keep it someplace hidden & safe
  • learn how to build/repair your credit score
  • get an accountant (and/or bookkeeper as needed) to help things stay on track
  • upgrade job/income/skills to get paid more for the work you do
  • fix or release any possessions that are broken, you’ll feel better trust me on this

Step 3. Some peace of mind

  • max out your HSA contribution
  • stop putting off any health interventions you’ve been procrastinating
  • set aside one month’s living expenses in coins/metals, keep it someplace safe & secure
  • increase stashed cash to 2x monthly living expenses, maybe store that month someplace else
  • increase living expense savings to 3x monthly usage, giving you a combined 6-months of runway in case of emergency
  • create/revise legal will & healthcare directives
  • seek qualified advice on legal tax optimization strategies
  • secure digital presence because you’re now a bigger target for hackers than ever before
  • apply for e-residency in Estonia (very easy)
  • research your family tree for possible second passport options
  • further refine all household possessions, keep only what makes you happy
  • make those longer term job/living changes for your own happiness, this is a health decision

Step 4. Diversify your risks

  • purchase additional coins/metal as desired directly from overseas storage provider (do not bring to USA)
  • get some low-cost index funds (NO direct stocks yet)
  • set aside enough money to quality to buy a home (20% down)
  • evaluate if perhaps some blockchain currencies might be worth exploring (this is not investment as much as speculation)
  • open a foreign bank account (deposit up to $8k, not more)
  • ask accountant about total foreign holdings reporting (over $10k on any day in a year means a new IRS form)
  • open company (LLC) for asset protection
  • open a Solo 401k or Self-Directed IRA
  • apply for residence from another country (Mexico is worth looking into)

Step 5. Invest toward the best

  • re-optimize those annual living expenses again if you haven’t lately, they need your attention every so often
  • create, assist, or otherwise double-down on an income-producing property or side business
  • ok now you can look at individual stocks, bonds, and other such assets, but get a financial advisor and don’t go crazy with them
  • open foreign brokerage account to include in Solo 401K / Self-Directed IRA (Australia recommended)
  • apply for second (dual) citizenship
  • open more companies as needed in various jurisdictions for optimized asset protection
  • after all of the above and having an extra $50k savings, you can go get a premiere-level foreign bank account
  • another $100k in savings and 3+ active companies later, it’s a great time to start a captive insurance company
  • $500k in savings after that, consider starting your own private offshore bank
  • if you have $1M in savings, it’s likely time to start that private offshore trust you’ve always wanted

I’m sure there’s more I’ll add as I get further along. If you have other stuff that I maybe forgot or didn’t get to yet, do tell. The comments below are great for that. Here’s some soundtrack for you from my first solo album :)