Low income no problem you can still pay off your debt fast. Keep reading for how to get out of debt fast even on a low income.
The average American is $38,000 in debt. This can come from a variety of places, including student loans, healthcare bills, and car loans, but a huge chunk of this—25%, to be exact—is in the form of credit card debt.
When you have a low income, it’s all too easy to get buried in debt. After a while, you may question if you’ll ever be able to pay it all off.
The good news is that getting out of debt is possible (especially with a debt consolidation loan), and you don’t need to get a serious pay raise to do so.
Do you want to know more? Keep reading to learn how you can lower and even eliminate your debt while on a low income.
Make or Update Your Budget
The first step in paying off your debt is getting a handle on your personal finances. If you don’t already have a solid budget in place, now is the time to create one. If you do have a budget, consider updating it to fit your current needs.
Creating a budget is easier than it sounds. Simply start by writing down your take-home income. This is the money you have left after taxes, insurance, and 401k contributions have been made.
Then, create a list of all your expenses, including rent or mortgage, your cell phone bill, loan payments, gas, groceries, eating out, and entertainment. When you subtract your monthly expenses from your take-home income, you should come up with a positive number, meaning you have money left over to put into savings or towards paying off your debts.
If you’re barely breaking even or spending more than you’re earning, you’ll need to make some serious changes to your budget. Which brings us to our next point…
Cut Back Wherever Possible
Even if you have extra money leftover at the end of the month, it’s always a good idea to cut back on expenses while trying to get out of debt.
The first places to look at are non-essentials, like eating out and entertainment. Even cutting out that weekly night at the bar and opting to drink at your friend’s house instead can save you a couple of hundred bucks at the end of the month.
Another big money saver is to cancel cable TV and opt for a TV streaming service like Netflix or Hulu.
It’s also a good idea to look at your necessities. Could you downgrade to a smaller apartment or trim costs on your cell phone bill? Can you switch to store brand foods instead of brand-name at the grocery store?
The more places you cut back, the more you can put towards debt payments. Even small savings here and there can add up into something big over time.
Get a Side Gig
When dealing with debt, it’s only natural to wish you made more money. But why not turn that wish into reality?
If getting a new and higher-paid job is out of the question, consider getting a side gig. Part-time serving and bartending jobs often leave you with a nice sum of money at the end of the night, but any job would help.
If you can’t pick up a second job, consider freelancing or doing odd jobs. If you’re good with your hands, you can offer to clean out gutters or repair things in your neighbor’s home for a small fee. Those with talent in writing, photography, or graphic design can find freelance opportunities online.
Focus on One Debt at a Time
The easiest way to pay off debt is to make more than the minimum payment every month. Of course, it can be hard to do this with every debt.
The best thing to do is identify what debt you want to pay off first. Ideally, this would be the debt with the highest interest rate. However, if you have any small debts that are almost paid off, you may feel better finishing these off first.
Once you’ve decided which debt you’ll tackle, make more than the minimum payment every month while still making the minimum amount on all other debts. After this debt has been paid off, pick another debt to focus on and repeat this process.
Consider Consolidating Your Debt
If you’re having trouble balancing all your different debts, consider consolidating them into one large loan. This will make it easier to manage, and you may even be able to get a lower interest rate.
Of course, you don’t have to consolidate all your loans. Let’s say you searched Bonsai Finance and discovered you could get a loan with a 7% interest rate. All your loans that have interest rates higher than that can be consolidated, but you can keep your loans with better interest rates separate to save the most money.
Talk to Your Creditors
Another option to manage your interest rates is to simply call your creditor and ask for a lower rate. It may seem like a long shot, but this actually happens fairly often. Plus, the worst thing that could happen is they say no, and your rates remain where they are.
Don’t stop at creditors, either. Oftentimes car insurance, cable, and internet bills can all be negotiated for a lower rate, saving you tons of money.
Paying Off Debt with a Low Income
Don’t settle for a life of debt. Instead, follow the above tips to help you pay off your loans. From updating your budget to asking creditors for a lower interest rate, there are tons of ways those with a low income can tackle debt.
Is your financial situation causing you a lot of stress? Then check out our anxiety and health blog pages for tips to help you relax.