If you have a dream of being debt-free, you aren’t alone. But it might feel like one of those dreams that you simply can’t reach because you have a low income and every dollar counts. Many, if not most, Americans are in debt and owe thousands of dollars in credit card debt, among other things.
Adding up car payments, mortgages or rent, food costs, and other such things can make it feel like you’re fighting off an arm all by yourself–and with nothing but a small stone. However, there are ways for eliminating debt on a low income. If you want your dreams of a debt-free life to become a reality, consider these ideas.
Figure Out What You Owe
If you want to get a handle on your debt, you have to figure out how much you owe. You might not really want to know, so instead, you just pay the monthly minimums when you can and call it good. But when you face what you owe, that’s the only way you will be able to figure out how to dig yourself out of the debt you have credited.
Make a list of every outstanding bill you have. Write the balance, the interest rate, and any late fees, penalties, or anything else you have to pay. Once you have a clear picture of the situation, you can figure out how to pay the debt down, even on a lower income.
Eliminate (Most) Frivolities
Having taken stock of your income and expenses, you’ll likely encounter subscriptions and other expenditures about which you hadn’t given much thought. Maybe you agreed to a free streaming service trial and forgot to opt out before the trial period ended. Maybe you signed up for a recurring subscription for something you no longer use. It’s really easy to do so, and those fees can add up to hundreds of dollars a year.
Maybe you’ve gotten into the habit of stopping by one of those fancy coffee places on the way to work, picking up a $5 cup of coffee every day. That’s $25 weekly if you work a five-day week, which can add up to $1200 monthly or more. Meanwhile, making your coffee at home would free up a significant chunk of change — yes?
With that said, it’s OK to keep one of those things in place — if you’ll use it and it gives you pleasure. We work to live, not vice versa. It’s important to keep some fun in our lives, especially when eliminating debt on a low income. Otherwise, you might come to resent the process and give up before reaching your goal. Get that coffee once a week instead of every day. Cancel all those subscriptions except the one you’re most likely to use. Dial things back to give you more money to put toward your debt, but don’t take all the joy out of your life.
Look For Ways to Further Trim Costs
Perhaps you’ve become accustomed to going to one of the higher-end grocery stores with the nice lighting, wood floors, and commensurately stratospheric prices. Food tastes just as good at the discount grocery store- even better when you’re eating debt-free. Stores like Grocery Outlet have great food at much better prices.
Coupons are your friends when you’re trying to cut costs; there is no shame in that game. Cook at home more, rather than paying extra for takeout. Look for used items when appropriate. Consignment stores have great prices on quality goods. Plus, you’ll reduce the amount of waste going to landfills. Shop eBay, thrift shops, and other places where you will likely find better prices. Go to Home Goods, Ross, and TJ Maxx rather than one of the big department stores.
Stop Taking On New Debts
The best thing you can do to start off your debt-free lifestyle is to stop taking on new debts. You want less to pay off, not more. Don’t open new credit cards to pay off old ones; if you choose credit card debt relief through loan consolidation, do not use the cards again until your consolidation loan is paid in full. Remember, rather than eliminate debt; consolidation rearranges it to make it easier to manage.
Earn Extra Money
You may have a smaller income, but that doesn’t mean there’s no room in your life to earn more. Look for places where you could earn more money, whether taking overtime hours, dog sitting for neighbors, delivering food, or something else. Maximize your free time and put the extra money toward your debt to pay it down faster.
Create A Budget — And Follow It
One thing the professionals at FDR (Freedom Debt Relief) stress is the need for a budget. You want to figure out how much income you have coming in and strategically where you will place it. List your fixed, recurring expenses and necessities. You can then figure out where you have wiggle room and how much you can pay towards debts. Create the budget and stick to it so you can see the debts going down regularly.
Pay Small Debts First
Once you know what you owe and to what company, the overall number can be overwhelming. However, tackling the smallest debt you own will have something to celebrate sooner. That will also decrease the overall creditors you owe, which can help you see steps in the right direction. Once you see those smaller debts moving toward zero can give you confidence in tackling the larger debts.
Look Into Credit Card Debt Relief
You will also want to look into credit card debt relief options, which can help you consolidate your debts under one loan. That can help you to make payments in a timely, affordable manner. Plus, you will owe less in the long run if you can get a lower interest rate on the loan overall. While taking on new debt, you are also getting rid of the large and small debts you were sinking beneath before.
Eliminating debt on a low income will not be easy, but with the right determination and plan in place, it can be done–with time.
What are some other ways to eliminate debt?