If you’re like many Americans, you’re experiencing mounting debt (perhaps already drowning in it, even) and scrambling to figure out how to pay off debt fast with low income. Failing to pay off your debt only causes it to increase while, at the same time, your credit score decreases. In the most extreme of cases, insurmountable debt can lead to defaults, repossessions, evictions, foreclosures and, even, bankruptcy.
Failing to pay it off fast only causes that compounding of the debt to accelerate, so that, even if you do eventually pay it off, you’re paying far more for that original debt than you needed to or, likely, ever considered spending for it.
Fortunately, "you’re not alone" is not the only comfort you can take.
You can also take comfort in the fact that tools, resources and simple tips exist—many, in fact—that can help you pay off debt fast with low income.
In this article, you’ll discover many of the simplest and most effective of these tools, resources and tips for getting out of debt as fast as you can, even with very little means with which to do so.
Read on to find the hope and empowerment you need to move forward in life free of debt.
As you review the following strategies for getting out of debt with low income, look for the one or ones that seem easiest to accomplish, and start with those.
Once you feel comfortable having implemented those strategies, incorporate one or two more.
The more of these strategies you are able to employ at once, the faster you can see your debt diminish and, ultimately, disappear.
It may seem antithetical to getting out of debt to set aside money for other purposes than paying down debt, but, in fact, in at least one case, it can actually help you get out of debt even faster.
Consider this: how did you get into debt in the first place? Some people (or even all or most people at some times) use debt to live outside their means.
For low-income individuals and families, however, debt is often the result of paying for those unplanned-for expenses that come up unexpectedly.
Now ask yourself: How much would an emergency fund have helped during those times you ended up needing to use debt to handle a sudden expense?
Another way of looking at it is like this: One of the biggest and fastest deterrents of your debt-repayment plans is these emergency expenses.
Set aside a small amount of your income each week into a fund you commit to only touching in cases of absolute, sudden, urgent emergency.
Keep this fund in a separate account, so that you’re not compelled to dip into it whenever you access your regular checking or savings account.
The next step to reducing your debt as fast as you can when you have little income to work with is to reign in your spending. Specifically, determine how much of your spending is on actual needs and how much is spent otherwise.
How much will it cost you per month to pay only for what you need?
To figure this out, write down all your necessary monthly expenses. These can include:
This is your minimalist (or minimal-needs) budget. From here, you can now look at your monthly income through the lens of this budget and see how much of your income is left to help you pay down your debt faster.
One helpful strategy for devising a minimal-needs budget is the zero-sum budget, in which you start with a predetermined amount of money (specifically, your actual income from the previous month) and work backwards, subtracting all your necessary expenses until you run out of expenses or money.
This can give you a stark view of your current financial situation, that you can then, tweak, to fit your new debt-repayment objectives.
Next is to look at possible ways to make these necessary expenses even lower, for they might be essential expenses, but that doesn’t mean they have to cost as much as they do.
Other suggestions include:
Let these ideas spur you to think up more ways to make your existing necessities cost less. That’ll only free up more funds to help you pay down that debt faster.
Credit card minimum payments are calculated in such a way as to stretch out your debt repayment as long as possible, thereby earning the credit card companies as much as possible in interest charges.
By paying just a little bit (even $5) more than the minimum payment on each of your credit card bills each month, you cut down considerably on how much that debt costs you over time in interest as well as how fast you pay down that debt.
There are at least a couple of different strategies financial gurus recommend for paying down debt, including the avalanche (or ladder) and the snowball.
In other words, with either strategy, you pay at least the minimum payment (ideally plus a little bit more) on all your debts.
Then, any extra money you wish to apply toward reducing your debt that month, apply to one debt in particular, based on whichever strategy you choose.
When that chosen debt is paid off completely, you move on to the next one in line, filtering all extra funds above the minimum-plus to that one until it, too, is paid off, and so on.
While there is a psychological benefit to the snowball method, in that, paying off a credit card completely produces a sense of satisfaction and reward that helps compel and inspire you to continue paying down larger debts, this method can also cost you more overall in interest charges before you’re done.
For people with a low income, however, it may be worth eschewing the short-term psychological benefit of paying off a small debt fast in favor of paying less for your debt overall, even if it may take a bit longer to do so.
Balance-transfer credit cards, debt-consolidation loans and debt refinancing are three powerful tools for reducing the total costs of your debt over time as you work to pay it off.
All three options should be considered carefully before you avail yourself of any of them, but each can help you with how to pay off debt fast with low income, if executed correctly.
Of course, any article about paying off debt with low income would be remiss without offering words of encouragement and aid in increasing that income.
Certainly, the more money you’re bringing in, the faster you can pay down that debt, and just because you’re low-income now, that doesn’t mean there aren’t ways available to you to improve that status.
For example, you can:
Most importantly while striving to pay off your debt with low income, remember that you don’t have to suffer in the interim.
You don’t have to commit to sacrificing all that give you joy and comfort in life until you’ve paid off all your debt.
In fact, that can actually make it harder to succeed in your debt repayment efforts.
The problem with trying to live a life of total sacrifice until such time as you’re no longer in debt is that it’s an unrealistic and unsustainable goal.
Under such strict and repressive conditions, people almost invariably reach a point where they can’t take it any longer.
Here's what can happen:
Instead, why not incorporate some of these treats, these rewards and comforts, into your minimal-needs budget?
Figure out how much you can reasonably afford to spend each week or each month on your favorite, low-cost rewards and comforts, and set aside the money for them.
Allow yourself to enjoy life at the same time as you work to pay down your debt by making them both part of the same larger plan: your own higher quality of living.
You don’t have to wait until you’re debt-free to start living. You can start reaping the rewards of your renewed commitments to yourself from day one.
As you can see from this article, you have many options available to you when trying to pay off debt with low income.
And you don’t have to navigate them all alone—nor should you.
Rather, to determine the best strategy for paying off your debt fast with low income, speak with a financial expert you can trust to assist you.
You can call us toll free at 800.342.2352 or visit us www.121FCU.org. We can help you find the best credit cards and loans available to help with your debt repayment goals, if that’s what you decide you need.