I have heard people say “How am I supposed to pay off debt when I can’t even pay my bills?” To state the obvious, you need more money. It is definitely going to be harder to pay off debt with a low income. But if you are determined, it can be done.
To pay off debt with a low income, you are going to need some tools. Before anything, you are going to need to DECIDE and COMMIT to the process. Then, you will need to find money – either make more or spend less.
And check out my blog post on how to use a cash only system to get out of debt.
These things are so important. You will not succeed if you haven’t given in to these two principles. Then, you need to follow these five steps outlined. It won’t be easy. In fact, with a low income, it will probably be harder. It will probably take longer, too. However, with determination, it can be done
Stop Borrowing Money
This must be first. Cut up the credit cards and commit to not borrowing any more money. If you don’t have the cash, you don’t buy it. You aren’t making enough to support your lifestyle or to make ends meet; then you need to adjust and not count on someone else to continuously loan you more money.
This means no more personal loans for home repairs or home improvements.
If it’s broke, use your emergency fund. If it’s an improvement, save up and pay cash. There is no reason to take out a loan for the paint to paint your house. An emergency fund is your best defence against debt.
There will be no more loans for any type of recreational vehicle. Campers, snowmobiles, ATV, motorcycles, and boats will all be bought in cash or they won’t be bought.
Stop the vicious cycle. It has to end, or you will never dig yourself out.
Debt has piled up and you don’t have the money to pay the bills you do have. Stop borrowing the money. You don’t have the money to pay it back.
Budgeting For Low Income
(And I know you know this is coming) Do you have a budget? A written, thought out, every penny accounted for type budget? Mhm, that is what I thought. According to a study done about five years ago, only 30 % of Americans have a budget. So, 70% of people do not know where their money is going!
This is more important than ever when you have a low income. One of the properties of money is its ability to dissipate right behind your back when you are not showing it the love it so badly craves. Pay attention. Create a budget. You might find more money than you knew you had. Even $10 or $20 a month is something!
Having a budget means you tell your money where to go instead of trying to figure out where it went. All while wondering how to put gas in your car this week so you can make more money.
It doesn’t matter how you do it. Use a planner, a notebook and pen, a digital budgeting system, or an app, just set one up.
Lower Your Grocery Bill
Cut back (or out) certain edible “luxuries.” And I use this word luxuries as a generalization of things that are not a necessity because you might not purchase many said “luxuries.” Maybe you could choose to go meatless a couple of days a week. Heck, you don’t need meat at all! I watched a couple on youtube who went Vegan – that is NO ANIMAL PRODUCTS AT ALL in the name of getting out of debt. They did quite well.
Things like cookies, ice cream, soda, and chips area few nonnecessities that could be cut out of your budget without being deprived of nutrition.
Make everything you can from scratch. This will take some extra time and planning, but it will be well worth it when you aren’t spending the extra money at the store for convenience.
Consider taking one day to meal plan and prepare for the entire week. It can save time and money all week long when you are tired and would just instead order pizza!
Many times, your grocery budget is one place in your debt free journey that has the most flexibility. Check out my ebook on spending $50 per person per month. It’s filled with helpful tips and recipes on the cheap!
Try A No Spend Month
GO ON A SPENDING FREEZE! Make it a game and then make it fun. Try it for a day, week, month, or even a year! Take a vow not to buy or if you need to buy, buy used. A no-spend month a fun social experiment with epic results to help you get a little closer to your goals.
A no spend challenge will also help you re-examine your priorities. Most Americans have enough clothes, so there is no need to buy clothes. Even a special occasion isn’t a good enough reason to buy a new dress. Try borrowing one first, and then try buying used.
A no-spend month (or year) can be as strict as you need it to be. Things like lunches or coffee can be included in the things you will not buy. Even buying gas and taking public transportation could fall into the no spend rules.
Make sure you celebrate when you do complete a day without spending any money. Do a happy dance in the kitchen and pour yourself a nice tall glass of water in your fanciest glass.
Stop Watching TV And Save Money
Can you imagine how much we could do without tv or internet? And imagine the money we would save? I would love to do a no screen challenge myself (using it only for blog purposes) to see how much I could get done. I bet I would sure read a lot more!
If you don’t want to get that drastic, consider getting an unlimited plan for your cell and dropping the internet.
Cancel cable, Netflix, Hulu, and Prime. Use the internet for entertainment. There are so many shows you can watch right on their website. NBC, ABC, FOX, PBS are all online. Buy a $30 antenna. I was surprised at how many channels one could get.
Many people choose alternatives to cable like Netflix, Hulu, and Sling. I propose cutting those out also and getting that antenna or even more extreme, skipping that as well and watching movies from the library and reading books.
Make More Money To Get Out Of Debt
Once you have cut back as much as you can in spending, it might be time to find more money. It isn’t forever. This may only be temporary.
If you have the skills, start looking for a better paying job. If you are not being paid a substantial liveable wage and enough money to pay off your existing debt – or even worse: paying the everyday bills you have, then its time to find something else.
Consider on-the-job training or adult continuing ed classes that you can take for free to gain more skills.
The infamous Side Hustle. You have to come up with extra money someplace, whether it is delivering pizzas at night, having a garage sale, or selling used items on eBay or Facebook.
Write a blog. Get crafty with that stockpile of fabric you have in the basement. Find a direct sales company that you love. Rake lawns…there are so many options available to make extra money!
Check out this article and ways to make some extra money: How to Make More Money Legitimately
Final thoughts on How To Pay Off Debt With A Low Income:
There are two ways to pay off debt on a low income: cut the amount going out or raise the money coming in. When you are committed to getting out of debt, do both. If you are determined to do it, you will find a way. No matter how extreme you need to take this, remember, it is only temporary.