How to Get Out of Debt with a Lower Income

Getting out of debt is challenging, especially when you have a lower income. Being able to pay for both everyday necessities and debt can be strenuous. The very thought of being debt-free may seem beyond possible due to your income. Although getting out of debt can be difficult with a lower income, it is not impossible.

Limit Unnecessary Purchases

When paying off debt, the last thing you want to do is overspend your money. Many things we buy in our day to day life can be unnecessary, without us even realizing. One of the most common unessential expenses that many people spend their money on is fast food. Although you may buy a coffee here and there, the cost will quickly add up. Before long, these small fast food stops can turn into hundreds of dollars. The key to keep in mind is the more money you save from other expenses, the sooner you can be debt-free. Make a monthly list of what you require and what you can realistically cut off. You may be surprised at how many things you discover are not as essential as you previously thought. By cutting even a couple items out each month, you can save quite a bit, which can go towards your debt.

Stay Out of Additional Debt

With a lower income, the last thing you want to do is get into more debt. When you already are in debt, it can be easy to continue getting deeper when you are not careful. Aside from the type of debt you have now, there can be other areas that put you into more debt. One example can be doing house upgrades and not calculating the costs before hand. Overall, getting into more debt will make your debt journey longer and continue to negatively affect your financial life. To avoid getting stuck in this trap, ensure that you stay away from large purchases. Even if you are wanting to do house projects now, wait until some of your debt has been paid off.

Pay Off High-Interest Debts

There are all sorts of methods to approaching your debt. Some people find paying off smaller debts first is helpful, as it motivates you to continue on to your other debts. Although this can be true for many, if you do not have a significant income, then focusing on higher interest debts may be more suitable. Paying off your higher debts first will actually save you more money in the long run. The more time that you allow these debts to sit for, the more interest they will accumulate. If you decide to pay these higher interest debts off later, then you will be left will an extra high interest cost. You can avoid paying hundreds or even thousands more if you focus on paying these off first.

Start With One Debt at a Time

When starting to pay off debt, some make the mistake of wanting to make payments on numerous different debts. Many have the common misconception that this will save time and help them be debt-free sooner. This unfortunately will do the opposite, since you will most likely run out of money to continue all of the debt payments. To have a successful debt journey, ensure that you pay off one debt at a time. Although paying one debt at a time may feel longer, you will be less stressed with only having to one payment a month.

Stay On Track

One of the most challenging things for those with a lower income is to stay on track with their debt. At first, you may be on track with your payments and everything is going smoothly. Yet after a few months, it can become difficult to keep up with payments. Many have paused on paying off their debt from lack of motivation and feelings of incapability. The best way to stay motivated is to continue looking at your end goal and working towards being debt free. When you keep this in mind, you can stay on track with paying off your debt.

Although it can seem truly impossible to get out of debt with a lower income, it certainly is not. Take time to analyze your debt and choose the best course to pay off your debt. When you do this, you will be able to reach your goal of being debt-free.

Sources

-Safier, Rebecca. Giovanetti, Erika (2022). How to Get Out of Debt on a Low Income. Lendingtree. Retrieved from https://www.lendingtree.com/debt-consolidation/debt-free-with-low-income/