How to Get Out of Debt on a Low Income-Tips

Being smart with how you spend your money is going to give you the best chance at getting out of debt. Coming up with a plan for how to reduce the debt and then pay it off requires using a few helpful tips.

Through this post I will provide helpful information and tips for how to get out of debt on a low income and how you can effectively do this.

Follow these 10 tips to speed up the process of paying off a debt including:

Write Out Your Current Debt Situation

Build a Detailed Budget

Focus on Key Areas To Cut Back On

Create A Realistic Payment Plan

Sell Your Extra Valuable Stuff

Get Another Job

Focus on Paying Off 1 Debt at a Time

Connect With Helpful Resources

Build A Safety Net

Learn More About Personal Finance

Each of these tips could help you but when you combine all of these tips together it is very likely that you will reduce how much debt you have efficiently.

Pen Writing on Paper
Write Out Your Current Debt Situation

Write Out Your Current Debt Situation

Determining exactly what your debt situation currently is can give you important information for where you at.

Take some time and write down on your computer, or a piece of paper, what all your debts are and the important information for each.

The important information for each could include the following:

  1. Debt Amount
  2. Interest Rate
  3. Minimum Payment Each Month

These are some of the more important factors and if you know what these are for a debt, then you will have a better grasp of what it will take to repay a debt.

I have always been someone who likes doing the math for any expenses and try to break down a debt into a monthly realistic amount.

I break down all of my normal expenses into monthly amounts so that I have a much more doable number to work towards and reach each month.

Sometimes writing it out by hand can be nice because then you can cross off stuff that you eventually complete.

Find which way of calculating your situation works best for you, writing it out by hand or on a computer and this will give you a much more accurate idea of where you are for your debt situation.

Budget Picture
Build a Detailed Budget

Build a Detailed Budget

Building a detailed budget will give you a good idea of where each of your hard-earned dollars are going. This budget will also show how you can re position some of that money in a way to focus on paying off debts.

A detailed budget includes calculating the following:

  • Gross Income
  • Post Taxes Income
  • Expenses

Understanding what you make after taxes will tell you how much money you have to work with for paying your expenses. A key detail for creating a strong budget is finding out what your post taxes income and is often a step that people don’t accurately calculate.

The best and easiest way that I have found for determining what you will pay in taxes is by going to the following website that is dedicated to calculating all taxes for you.

You simply enter your gross income for the year, where you live and you’re filing status and then it calculates what your taxes will be.

Figuring out your expenses can be accomplished by reviewing your online bank account transaction statement for all your debit and credit cards.

Doing this will show you most of your expenses except for some that have occurred through cash transactions.

Post Income Taxes – Expenses = Net Income

Once you have calculated your expenses, you can take your post taxes income and subtract your expenses from that amount to give you your net income after all expenses have been accounted.

You can break down your net income by 12 to give yourself your monthly extra income that you have to work with.

Focus on Key Areas To Cut Back On

There are key areas to cut back on that can be changed relatively easily and can save you a significant amount of money.

The main areas that I like to focus on are the more flexible expenses.

These expenses to focus on include the following:

  1. Food
  2. Car
  3. Miscellaneous Expenses

The food expense is best reduced by meal planning more and eating out less. Eating out not only less but focusing on saving more when you are actually eating out at a restaurant can lead to savings for all the parts of your life that involve food.

Food is such a necessity for everyone that having a money saving way of getting most of your food taken care of is just smart.

I like to meal plan most of my meals so that I never get forced into buying something at a more expensive restaurant.

Sandwich
Food Prep More to Save Big

Usually I make a fruit smoothie, turkey sandwich and rice or quinoa dinner dish. Making these 3 staples everyday sets me up so that I have a much hugely better chance of saving money.

Focus on buying easy to create staples of food and you should find yourself saving a lot.

Car expenses can be reduced by simply not driving as much and finding way to do this. The ways to cut down on how much you are driving include carpooling, biking or walking and taking public transportation more.

Other ways to reduce car expenses are to find tips to save on gas and on car maintenance costs. You can reduce both by driving less but you can also use helpful resources, such as GasBuddy, to find the cheapest gas stations to save the most on gas.

Car maintenance expenses can be further decreased by keeping your car’s oil level properly filled and efficiently washing your car.

Miscellaneous Expenses can be reduced by reviewing your online bank account transaction statement because this will show you all of your expenses coming from your account.

Quick ways to cut down on some miscellaneous expenses could include the following:

  • Going to the movie theater less by watching movies on your streaming channels
  • Unsubscribing to any unused subscriptions
  • Cutting out any extra expenses

Miscellaneous expenses can be sneaky ones that can take money out of your bank account. Review your current budget and all expenses and determine which ones can be cut out or reduced significantly.

Even a little savings on each expense could lead to a significant amount of extra money each month.

Reducing these expenses can give you significant amounts of savings which can be used to pay off debt.

Create A Realistic Payment Plan

An easy way to create a realistic payment plan is to break down each debt into a doable amount.

If you have a $1,500 debt and are determined to pay it off within 6 months, then you will have to pay $250 for this debt every month.

This is accounting for any interest rate but can still give you a doable number to work towards for each month.

Using a credit card repayment calculator can be beneficial for giving you more accurate numbers that you will need to pay each month for each specific debt. These calculators will account for the interest rate that is connected to each specific debt.

A good credit card repayment calculator can be found on Credit Karma.

Using this calculator for the same example above will give you the exact numbers you will be expected to pay and how much the interest rate will affect how much more you have to pay.

$1,500 = Debt Owed

6 Months = Planned Time to Pay Off Debt

5% = Interest Rate

$1,500/6 = $254 per month

If you have a $1,500 debt that you want to pay off in 6 months and it has a 5% interest rate, then you will have to pay $254 each month in order to pay it off in 6 months.

The interest rate will add $22 to your total amount due if you pay it off with these $254 payments each month.

Nice Couch
Sell Your Extra Valuable Stuff

Sell Your Extra Valuable Stuff

Selling some of your stuff could get you some extra money, especially if use the right resources to sell to or through.

Using the right resources can help you sell your more valuable stuff quicker and get more money.

Use the following 3 resources:

  • Friends and Coworkers
  • Craigslist
  • Facebook Marketplace

Each of these resources could help make it easier for you to find people interested in your stuff. Informing friends and coworkers that you are selling items could either lead you to sell those items to them or they could set you up with someone who does want to buy what you have.

Craigslist has long been a platform for selling valuable items and if you are able to market your stuff well with detailed information and high quality images, then you could make some money.

This is a little less likely to lead to money for your stuff but if you focus on selling higher value stuff and market it well, then you will have a better chance. You will be able to put the word out to a large amount of people through Craigslist.

Another resource could be Facebook marketplace because this can target your local area and put the word out to that population.

You can advertise furniture, TVs, textbooks, a room for rent and much more through this resource.

It could take some time to find people interested in buying your stuff but this could give you a better chance at selling your more valuable stuff.

If you are interested in learning more about how to use Craigslist to get money, read How to Make Money with Craigslist.

Get Another Job

Getting another job can be a great way to boost your income until you have reduced the debt to nothing.

Picking jobs that are realistically possible for you to do until your debt is reduced to nothing is going to be the most helpful way to increase your income without adding tons of more stress to your life.

Woman Walking dog on Beach
Dog Walk for Side Income

Easier jobs could be any of the following:

  • Dog Walking/Dog Sitting
  • Delivery Driver(Uber, Lyft or DoorDash)

Any of these jobs could be possible in your area but will be more likely if you live in a high population area. I have walked dogs for neighbors or friends before to pick up some extra money and that can be an easy way to pick up some cash.

Dog sitting could be a way to earn extra money and pick up more money that can go with your dog walking clients or as an extra job that you are willing to do.

There is always a need for drivers for food or for giving people rides around town. I would go for this option second after trying dog walking or dog sitting primarily because you will most likely be able to make more money doing the first option.

86 dollars
Focus on Paying Off 1 Debt at a Time

 

Focus on Paying Off 1 Debt at a Time

When deciding which debt to start paying off first, you must choose between the smallest debt or the highest interest rate debt. The two main methods are the Avalanche and the Snowball.

Avalanche Method

The avalanche method involves taking on the highest interest rate debt. By doing this you will save yourself money in the long run because you won’t have to pay as much in interest.

You focus on paying the minimum payments for your other debts and then put any extra money into this high interest debt. This method can help you pay off the amounts sooner but it is not necessarily the best option for everyone.

This is because some people are more likely to stay with paying off their debts if they are actually eliminating a debt.

Reducing the amount of a debt with high interest rate could be saving a person a lot of money. But still having that debt on their plate could be negatively affecting someone.

Snowball Method

This method evolves choosing the smallest debt and paying it off first. Say you have three debts including a $300, $600 and $1,200, respectively. Using the Snowball method means that you would choose the $300 debt.

By focusing on this smaller amount you will be able to conqueror it more easily. Once you have paid off this debt, you will gain confidence in your ability to pay off your debts.

This method is mostly for people who are having a harder time staying motivated in paying off their debts. In the long run, this method will likely cost you more. This is because the higher interest rate debts are the ones that are more likely to cost you more.

Dave Ramsey first came up with this idea for paying off debt and this method can be quite effective. If you have struggled with debt for a long time and not been able to stay motivated to get the debts paid off, then use this method.

If you want to learn more about Dave Ramsey’s ideas for managing money, read The Total Money Makeover Review.

Decide which method would work better for you and focus on that method. As long as you stick with either method, you will have a better chance at eliminating debt from your financial situation.

Focusing on paying off 1 debt completely can be a great way to tackle the debt. Each debt that is paid off will feel like a big weight has been lifted off your shoulders and picking the right debt to go for first is key.

Take on the smallest debt first so that you can completely take that one out of the equation. As you are paying off this first debt you will continue to make minimum payments on the other debts so that you can get the ball rolling on paying off the debt.

Library Resource
Connect With Knowledgable and Helpful Resources

Connect With Helpful Resources

Connect with helpful resources to get more useful information and tips for reducing debt.

The more information you can learn about personal finance and debt repayment strategies the more likely you will be to pay off the debt effectively.

Some beneficial resources include the following:

  • The Penny Hoarder
  • Credit Karma

The Penny Hoarder has many sections dedicated to educating people on how to budget money as well as get out of debt. This can be a useful website to visit to gather specific information on how to efficiently reduce debt as well as how to save or budget money intelligently.

Credit Karma is a resource that can give you tons of great information about credit cards, loans and car insurance.

This resource can give you many ideas for how to reduce key expenses as well as teach you helpful ways to build up your credit score.

Downloading the Credit Karma app can help you easily stay up to date with where you are at for paying off a debt. I like to use this app often because it checks your account once a week to show your most current credit score and tips to further increase this score.

Credit Karma and The Penny Hoarder can both provide beneficial information on how to effectively cut down on your debt and offer creative ideas to accomplish this.

Build A Safety Net

Building a safety net is critical for having financial security and feeling in control of your finances. A safety net that is able to cover 3 months worth of your expenses is said to be close to ideal for keeping your finances within your control.

A safety net protects you from unexpected expenses which are simply a product of life.

There will always be miscellaneous costs that we can’t fully account for and having a significant amount of money built up in your bank account can keep you protected from these costs.

Woman Reading
Learn and Read More About Personal Finance

Learn More About Personal Finance

Continuing to educate yourself on personal finance and new ways to save, make or budget money is going to be the best way for you to keep getting better and better with your money.

Reading more articles, books and finding time to keep learning new tips for managing money is going to protect you from debt having control over you.

There is always more to learn and finding a way to incorporate this new information into your routine is going to help you become very strong with your money managing skills.

If you liked this post, then you might enjoy reading Side Hustle Book Review.

Manage Your Finances Better

Use the tips and resources here consistently and you shall have a much greater chance at reducing and eventually eliminating debt from your life.

Keep educating yourself more and you will continue to learn new ways to reduce and eliminate debt.

I hope that you liked the tips in this post and found some useful information about how to get out of debt on a low income.

If you have any questions, please leave them below and I will answer them to the best of my ability.

8 Replies to “How to Get Out of Debt on a Low Income-Tips”

  1. Very good post!

    What works for me is creating a spreadsheet keeping track of my daily/weekly expenses. If one week the spending is too high, I try to cut costs the following week.

    At my workplace people continuously buy their lunches everyday. The costs really add up. I make my lunch everyday – yogurt, sandwich and fruit. That’s it.

    Saves so much money.

    1. Creating a spreadsheet for your daily and weekly expenses is very smart!
      I could see that being effective for staying on top of your finances.
      Bringing a prepared lunch always is going to save you tons of money.
      I like to prepare my lunch and snacks for the day too.
      I am happy that you liked this post!

  2. Thank you so much for sharing your tips on getting out of debt. I feel overwhelmed sometimes by my morgage and other debts and if I look at the length of them I feel crushed.
    Your snowball method seems to be right for me, I would feel better and encouraged if I could pay off a little debt and then go to the bigger ones.
    As to ways for saving money, I guess I will cut down my gas expenses and walk more. But don’t touch my food! Haha
    I don’t have much time for another job. Would you have any advice on passive income creation?
    Thanks in advance!

    1. You are welcome!
      The snowball method is great to conqueror one debt at a time and feel yourself gaining momentum.
      If you are trying to find a way to maximize your time, then I would check out Work Simply Carson Tate.
      This post is full of strategies to be more efficient and effective with your time.
      I am happy that you liked this post and found useful information here!

  3. Hey Jesse,
    I had managed to get myself into debt several years ago. I wish I had this article to help me at the time. I finally got out of debt, but I think it would have taken me less time if I had the right advice.

    I am in the financial market and am always looking for articles to reference. Your article appeared on my radar. I’ve bookmarked as a possible source to cite for an upcoming article that’s on my editorial calendar.

    What I remember from my debt experience is that after a couple of months of seeing the debt levels reduce, you get stoked about doing it and want to get it done quicker. In fact, you try to find ways to accelerate the process by finding more money or cutting back more expenses, etc.

    I do agree with you that you need a cushion though for emergencies. Therefore, it’s better to wait until you have a comfortable amount saved before accelerating your efforts.

    I do believe anyone regardless of their income level can get out of debt with the right plan.

    You offer great tips in this article. Keep up the good work and thanks!

    Best Regards,
    Jim

  4. I am always searching for ways to make more money, and to save more money. Part of this get rich plan is to clear all my debts. And I must say that all the tips you gave are spot on. Very good ideas with very good actionable steps.

    I have done many of what you suggested, and have cleared all my debts some years back. But life does happen, and I found myself with one more debt to clear. So, here I am reviewing your tips, and learning again how to get rid of that final debt.

    Thanks for the ideas. I will implement them and look forward to a wealthy life.

    1. You are welcome!
      Life can definitely happen and having the right information can be key for clearing debts. Sounds like you have a plan and that your final debt will be cleared soon.
      I am happy that you liked the tips in this post!

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