How do I get out of Debt with Low Income?

If you have a relatively low income, dealing with debt can be overwhelming. It might feel like you’ll never get out from under your pile of debt. However, all is not lost. There are ways to become debt-free, but you must put in the work. 

This article will examine several tips and tricks for getting out of debt when you have a low income.

debt

Examine Your Finances Closely and Make Cuts to Your Expenses

The first thing you need to do when you find yourself in over your head with debt is to take a close look at your financial situation. You need to examine how much money you have, what you’re spending your money on, and what your future earnings and upcoming expenses look like. Then you need to make a detailed list of all your debts. It is very difficult to get yourself out of debt if you spend a lot of money on a variety of unnecessary expenses. Therefore, you need to take an ax to some of your spendings and cut out what you don’t need. Be ruthless. Every dollar counts.

Consolidate Your Debts

If you have a bunch of debt from multiple sources, it may be worthwhile to look into a debt consolidation loan. This requires that you take out a loan to pay off all your debts at once. As a result, you may get a lower interest rate and a lower monthly payment. Furthermore, you won’t have to worry about keeping up with multiple payment due dates. However, it is important that you factor the consolidated debt payment into your budget. You must make this payment on time and in full to keep from falling into a debt spiral.

Look For Income Opportunities

Suppose you’ve cut your spending as much as possible, and you’re still having trouble paying for your living expenses and making your debt repayments. In that case, it may be time to look for additional income opportunities. This means taking on part-time work, doing odd jobs, taking online surveys, selling some of your professions, or renting out space in your home.

Consider Doing Without Your Car

Cars are a huge source of debt. Not only do they depreciate in value the moment you drive them off the lot, but they also cost a ton of money to maintain. You have to pay for insurance, gas, regular maintenance, on top of payments on the car itself. Therefore, if you have a low income and you’re trying to get out of debt, you should consider giving up your vehicle. Other forms of transportation are much cheaper. They may be less convenient, but you will save a ton of money if, for instance, you take public transit instead. 

Pay Off One Balance At A Time

If you’re dealing with multiple debts, it may seem prudent to pay a little on each debt each month. However, doing so makes it hard to get ahead as you’ll pay interest fees and possibly late fees on each individual bill. A better way to go about paying your debts is to save up and pay one balance off at a time. Begin with the bill that has the highest interest and pay it off completely. The move on to the bill with the next highest interest and so on and so forth. By paying off your debt this way, you will save money on interest, and you can use your savings to pay down more of your debt.

Don’t Go Further Into Debt

If you’re in debt and you have a low income, you need to stop borrowing money immediately. Otherwise, you’ll never get out of debt. This means you need to stop using your credit card to pay for things, and you need to stop taking out loans. Instead, you should only use the cash you have on hand to pay for your expenses. This will mean you’ll have to have a very strict budget, so you have the cash when you need it, but in the long run, you’ll benefit by being able to pay off your debt.

Conclusion

When you have a low income, being in debt is a scary thing. However, if you’re serious about getting out of debt, you should implement one or more of the strategies listed above. Following any of these methods will ensure that eventually, you are debt-free.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.