How to Get Out of Debt on a Low Income

Living with debt can be overwhelming, especially when you are managing it on a low income. It is a common struggle to feel trapped, with little hope of financial freedom. But do not worry—there are practical strategies to help you get out of debt, even with a tight budget.

Steps on How to Get Out of Debt on a Low Income

1. List Out All of Your Debts

The first step in tackling debt is to figure out how much you owe. Make a list of all your debts including outstanding balances, interest rates, and minimum payments.

And don’t forget to include all of them! Start with your largest debts, such as student loans or car loans, and work your way down to smaller debts like credit cards.

This helps you figure out which debts to tackle first, lets you see your progress, and makes it easier to plan your repayments.

2. Track Your Income and Expenses

Understanding your monthly income and expenses is key to figuring out how much you can put toward paying off your debt. Start by adding up all your monthly income from different sources. Then, subtract your necessary expenses like housing, utilities, and groceries. What is left is what you can use to tackle your debt each month.

For a quick and easy way to do this, you can use a debt-to-income calculator.

3. Identify Essential vs. Non-Essential Expenses

Try to avoid overspending. Start by focusing on the must-haves like housing, utilities, and groceries. Once those are covered, take a closer look at your other spending habits, like entertainment and dining out. Spotting areas where you are spending too much can help you save more money to pay off your debts.

For instance, if you notice you’re subscribed to multiple streaming services, try cutting down to one or two favourites. Or, if you’re eating out a lot, aim to cook more meals at home. Small changes like these can add up and make a big difference in your debt repayment journey.

4. Set a Realistic Budget with SMART Goals

After you have tracked your income and expenses, set clear and achievable budget goals. Decide exactly how much money you can put towards paying off debt each month and try your best to stick to it.

Make sure your goals are SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.

For example, instead of saying, “I want to save money,” set a goal like, “I will save $50 a month by eating out less.” This specific and realistic target will keep you motivated and on track.

Tip: Setting up automatic payments can help you stay consistent.

5. Explore Government Assistance Programs

Depending on your situation, you might qualify for government assistance programs that offer financial relief. Look for programs in your area that help with housing, food, or utility bills. These can free up more of your income for debt repayment.

Try Different Payment Strategies to Help You Get Out of Debt

Methods You Can Try to Pay Off Your Debt

When it comes to tackling debt, there are a couple of methods you can use. With the snowball method, you start by paying off your smallest debts first, then working towards paying off your larger debts. In comparison, the avalanche method focuses on paying off debts with the highest interest rates first.

For example, if you have three debts with balances of $500, $2,000, and $10,000, and you use the snowball method, you would start by paying off the $500 debt first. This gives you a quick win and motivates you to tackle the next debt.

On the other hand, with the avalanche method, you would start with the debt that has the highest interest rate, even if it has a larger balance, which can help you save on interest payments in the long run.

Give More than Your Minimum Payments

Whenever you can, put extra funds towards paying off your debt. This can help reduce the time it takes to pay off your debt, while also letting you save money on interest in the long run.

But that does not have to mean you need to pay it off with huge sums of money. Even small amounts, like an extra $20 or $50 per month, can make a big difference over time.

Understand Your Options

If you are struggling to make progress on your own, constantly asking yourself how you can get out of debt with a low income, consider consulting debt solution experts. They can provide guidance on debt management plans, repayment plans, and other debt-relief options that might be suitable for your situation.

How Farber Can Help You Get Out of Debt

At Farber, we believe that everyone deserves a chance to turn their debt stress into debt relief, regardless of their income level.

Our team of debt solution experts can help you explore options tailored to your unique situation. We will work with you to create a manageable debt repayment plan, while also giving you the support you need to build a healthier relationship with money.

Getting out of debt on a low income is challenging, but it is not impossible. By understanding your debt situation, creating a realistic budget and choosing the right debt repayment strategy, you can take control of your finances, starting today!

Connect with us today for a free consultation — we’re happy to help.