Become a Consultant to Defeat Debt Quickly

The recent discussion about job-loss included a debate on the merits of becoming a consultant. Regular reader Andréa Coutu is a consultant. She wrote this guest article on how to become a consultant in order to explain the concept to Get Rich Slowly readers.

Getting rid of household debt is one of the best ways to put your financial house in order. But sometimes debt can seem insurmountable. The percentage of disposable income used to pay debt hovers near all-time highs. And if you fall into the trap of only paying the minimum each month, you may face years of struggling to make ends meet.
 
The average household owes around $8,000 on credit cards. If you paid the minimum each month at 18% interest, it would take 30 years to pay off the card! Even at 8%, it would take you 17 years. Yikes!
 
If you're struggling with debt, you may be thinking about taking on a second job. But, to make double the minimum 2.5% payment on an $8,000 credit card bill, you'd need to make $400 a month — and it would still take 10 years to pay off at an 18% interest rate. To make $400 a month after tax at a second job that pays $10 or $25 an hour, you'd have to work somewhere between 20 and 50 hours a month, depending on your tax rate. That's a lot of time and effort for $400.
 
Bang for the second job buck
It's little surprise, then, that many people turn to consulting as a way to generate a second income. As a consultant, you can typically charge somewhere between $35 and $300 an hour. Even at $35 an hour, you'd probably only need to bill 10 or 12 hours a month to clear enough to double your credit card payments. By billing just 20 or 24 hours a month, you could pay off the entire $8,000 credit card debt in less than a year.
 
Wipe out debt
By moonlighting outside your day job, you can create a second income that can help you wipe out debt. Even if you don't have credit card bills, you may have a car loan, mortgage, home equity loan or some other financial obligation. Consulting can help you pay down those debts and start on the road to financial freedom. For example, in just three years, one family I know has used consulting to pay down $30,000 of their mortgage, pay for renovations that increased their home's value by 10%, contribute $20,000 to retirement savings and create a $5,000 college fund for their toddler.
 
Get on your feet
Once you've erased your debt load, consulting can help you prepare for financial emergencies and save for goals. One of my friends has been earning $20,000 a year on top of her day job. She's got $75,000 saved for a downpayment and more socked away in emergency and retirement savings funds.
 
Consult from anywhere
Whether you're in a tiny hamlet or mid-town Manhattan, you can take up consulting. Many companies will work with remote consultants. When I was just starting out, the Internet helped me find clients in California, Georgia and Ontario, even though I was based in Vancouver. Over the years, I've even had inquiries from places like the Balkans and the Arctic.
 
Seize the opportunity
If you're new to moonlighting, “consulting” may sound intimidating. It's really just a fancy word for someone who trades their knowledge and expertise for pay. Every time you make a suggestion, recommend a process, draw up a plan or manage a process, you're using consulting skills. To get into consulting, you just need to find someone who can use your expertise. By carrying out a personal inventory of your skills, interests and talents, you can better judge where your consulting opportunities lie. Then you can work out a plan for finding new clients. In many cases, you'll find that just putting the word out to your friends, co-workers and business network will do the trick. People like to work with people they like.
 
So, if you're trying to deal with a mountain of debt, consider looking for ways to pay it off sooner. Although it's often easy to find a second job at minimum wage, you may be in for a long struggle. Instead, look at ways to earn a professional income so that you can pay down your debt faster or at least with fewer hours of work.

[J.D.'s note: I've done some independent computer consulting, and can testify that it's an excellent way to make money. The key to consulting success is to pursue new clients. One book that helped me is Free Agent Nation: The Future of Working for Yourself by Daniel H. Pink, who actually has a blog. The magazine article that inspired the book is available online.]

Andréa Coutu is a marketing consultant in Vancouver, Canada. She runs consultantjournal.com, a blog designed to help people survive and thrive as independent consultants. For more information, check out her blog series on getting out of debt via consulting.

More about...Career, Debt, Side Hustles

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
10 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Dr. Housing Bubble
Dr. Housing Bubble
13 years ago

Great post. I would also recommend transferring and consolidating high interest credit card debts onto a zero percent offer. In addition, many folks have $5,000 in cash sitting in a bank account while they have $8,000 in credit card debt charging 20% interest. The way I would look at this is that you have a guaranteed investment of 20% by paying off that debt. Where else can you get that type of return? Somehow folks feel safe just having the income sitting in their low interest savings account. In terms of getting a second job I would also include increasing… Read more »

pearlandopal
pearlandopal
13 years ago

The reason people like to have money sitting in a savings account is so that they have a cushion in case of emergencies. My husband, who’d previously been in perfect health, developed a seizure disorder last year and since he wasn’t insured we ended up with $15,000 in medical debt over those four days of hospital care while they tried to figure out what was wrong. He’s on medication now, but they still don’t know what’s causing the seizures. If he were to be suddenly incapacitated, God forbid, we’d need every cent of the small cushion of money we’ve managed… Read more »

MillionDollarJourney.com
MillionDollarJourney.com
13 years ago

So Andrea Coutu is a consultant on how to be a consultant… clever. 🙂

FrugalTrader
http://www.milliondollarjourney.com

Andrea >> Become a Consultant Blog
Andrea >> Become a Consultant Blog
13 years ago

He he…I am actually a marketing consultant. However, I get so many emails from people asking me to do information interviews, give career advice, review resumes and the like that I decided to just start a site on becoming a consultant.

Randy Wilburn
Randy Wilburn
13 years ago

I think Andrea has some great ideas about earning some extra cash. I have found that Consulting and even Coaching can be a way to earn some extra cash. People are always looking for new ideas and especially encouragement. A good consultant or coach can scratch that itch… Most people have an expertise in one are or another. If you get creative you can find an audience for all of that information that you have up in your head. You’d be suprised who you can help. Just be sure to attach a value to the work you do otherwise people… Read more »

brad
brad
13 years ago

Another thing about independent consulting is that if you end up liking it you may be able to put those skills and experience to work for a consulting firm. Day-to-day it’s not much different from independent consulting (I’ve been working fulltime for a consulting firm for the last 10 years; that firm was a client of mine when I was a freelancer), but there are a few distinct advantages to working for a firm, such as paid vacations and holidays, health insurance, retirement plans, and other benefits. Plus the reality of the consulting biz is that there are peaks and… Read more »

Nelson Fox
Nelson Fox
13 years ago

Why not invest in yourself first?
Great post.
We work jobs to get paid but forget most of the time to “pay” ourselves.
Which is the savings, so make it a habit, even if its a small amount, do it consistently.
DEBT FREE FOCUS! CASH FLOW should be our goal. Just like pearlandopal mentioned we will have an issue in our life and we need to be prepared for it.

Andrea >> Become a Consultant Blog
Andrea >> Become a Consultant Blog
13 years ago

Those are great points, Brad. A regular job does cover some of the expenses and downcycles you mention. That’s why I encourage people to set consulting fee rates in a way that will make up for those things. However, the onus is on the independent consultant to set money aside in a rainy day fund. (Although shouldn’t we all have one of those?)

Greg Miliates
Greg Miliates
8 years ago

I truly think that freelancing/consulting is a great business model–either as a side business or with the intent of building it into your full-time endeavor–because a freelance/consulting business has:    –>very low start-up costs,    –>flexible hours,    –>a high hourly pay rate, and    –>you likely already have the expertise to get started. In addition, consulting is a simple business model that let’s you learn the ropes of running and growing a successful business. Every business is different, but what I’ve found from running my own consulting business for nearly 5 years is: –>I make MUCH more than I… Read more »

EconomicallyHumble.com
EconomicallyHumble.com
8 years ago

This is a very useful post (with some great links). I’m gearing up to start a consulting business to help me pay off my student loans.

shares