How to Payoff Debt on a Low Income

low income debt

Becoming debt-free can be a struggle for a lot of people. However, people who earn a low income may find this feat particularly difficult to achieve because of the money coming in every month. In fact, it’s not uncommon for you to live paycheck to paycheck if you’re on a low income. This usually leaves little to no money to tackle your debts in the way you’d like to. In this post, we’ll provide you with some easy and practical ways you can lower and eventually eliminate your debt no matter how low your income is.

Stop the Credit Card Madness

Credit can be a great way of establishing a good financial picture especially with regard to your FICO score. A healthy FICO score can play a role in important things such as applying and getting approved for various types of loans as well as things such as renting a house, buying a car and getting employed in various industries. That being said, the last thing you want to do is to keep digging if you’re in debt. Stop using your credit cards and switch to debit or cash and you’ll be able to turn off the overflowing tap that is your debt problems.

Categorize Your Debts and Create a Payment Plan

At any given time, most of us have different types of debts such as car payments, the mortgage, credit card debt, loans and more. That being said, these debts can be divided into two: secured and unsecured debt. Secured debts, for example, are backed up by collateral or security that you may lose if you ever defaulted on paying them (this is especially true of houses and cars). A great way of taking down these debts is to apply the snowball effect. This simply means putting a large amount money on the secured debts and then paying off the minimum on the others. Keep doing this, tackling the most important ones until they are paid off. This way, you make progress in a multifaceted manner, which will help you tackle your debt in a much faster way.

Reconsider Your Priorities

Happiness can come from various things in life. That being said, we have been programmed to think that money is the only thing that brings happiness. This may have caused a lot of us to spend money on things that don’t matter in the quest to find happiness. The 5 Starbucks coffees a week, the magazine and cable subscriptions, expensive holidays, fancy gadgets all drag us deeper into debt.

Start by cancelling all subscriptions that may not be a necessity, and consider purchasing food and house items in bulk. This can save you a lot of money in the long run since these essentials make up a large fraction of the average person’s monthly income. On top of that, you can start couponing to save big bucks as well as saving leftovers to eat later and planning meals before time to keep your food bill low. Spend more time with your family doing meaningful things, and you’ll realize that it’s not how much you spend that counts, it’s the experiences you have with your loved ones that does.

No matter how much you earn, these tips can be applied universally to help you get you out of debt in no time.