How to Get Out of Debt Fast With a Low Income
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Dealing with debt is not fun for anyone, especially for those who have a relatively low income. If you have a lot of debt and a low income, it might feel like you will never be able to crawl out of debt. However, this doesn’t have to be the case.
When it comes to getting out of debt, there are always ways, even though it might not appear that way at first. Not only that, but there are ways to do it at speeds that you never thought possible before. Basically, if you are willing to put your heart and soul into eliminating your debt, and make some important lifestyle changes, it can be done.
This article will look at a number of different tips and tricks to help you get out of debt fast, even with a fairly low income. Some will be relatively easy and quick to implement into your life, while others might take a little bit of time and planning. Either way, all of the tips in this article will be instrumental in helping you dig yourself out of debt.
Living without a steady income? Read this.
Take a Close and Unbiased Look at Your Finances
The first thing you should do when you want to get yourself out of debt fast? You need to take a look at your entire financial situation. How much you have, what you spend, what you make, future outlook for earnings and upcoming expenses are all things that you should think about. Of course, you also need to make a detailed list of all of your debts, so you understand what you are going up against. Once you take a look at everything and preferably make spreadsheets for it all, you will be ready to attack your debt.
Make a Budget
Yes, if you want to get out of debt quickly and effectively with a low income, you will likely need to make a budget. Making a budget is not something many people love or look forward to doing, but it is a necessary evil. A budget is perhaps the best way to know exactly where all of your money is going, by tracking every dollar you spend and save every month. Thankfully, if you don’t like the old method of pen and paper, there are several different types of budgeting software (including YNAB and Mint) out there that make budgeting easier than ever.
Here’s a list of the top budgeting apps for Canadians.
Personal finance is a very complex and difficult-to-understand topic. There is a lot to know and if you want to get out of debt fast, you need to study up. It’s good to learn all the ins and outs of the financial world. If you don’t educate yourself, you will not be able to make much progress. By reading this article and others like it, you are taking the necessary steps to educate yourself on this topic and others like it and you deserve to be commended for it.
If you have children, it’s also important to teach them about personal finance. Click here to learn how.
Look at Your Expenses and Cut Back
It becomes very difficult to get yourself out of debt when you are spending a ton of money on various expenses and subscriptions. Most people simply spend too much on things they don’t need, it’s as simple as that. Whether it is a cable package, Netflix, a music streaming service, gym or anything else, these can often be very expensive for how little most people use them. While we’re not telling you to ditch every single subscription and cut all your expenses to nothing, it could be a good idea to take a close look and see what you could at least be cutting back on. If you are working with a fairly low income, every dollar counts, so you want to cut down your spending and expenses as much as you can handle.
Trying to get fit on a budget? Read this.
Find Ways to Make More Income, If Possible
If you find it difficult to cut your spending even more than you already are, then you might have to look at making more money. If you have more money, your debts will be easier to eliminate. While this isn’t always an option for everyone, there are a ton of things you can do to make some extra money. Try taking on more hours at work, renting out items or a room in your home, finding a second job or doing odd jobs, taking online surveys, and more. Even just selling some items for some cash to throw at the debt can help.
Check out this infographic to learn more about tackling your debt.
Make More Than Minimum Payments
Simply put, if you just pay the minimum payment on your credit cards each month, you may never be able to get out of debt. Essentially, if you are only paying the minimum, your interest charges are likely accumulating quicker than you can pay down your debt. In addition to that, making larger payments will also help you become debt-free much quicker than if you only made your minimum payments. While you should be aggressive with tackling your debt and make large payments, be sure to save enough money in case of an emergency.
To read more about the minimum payment trap, look here.
Attack Your Debt By Paying off One Balance at a time
If you only have one debt to pay, consider yourself lucky. Many people are dealing with multiple types of debt from multiple sources. With so much debt, it can be extremely hard to get ahead. Most people might think it’s smart to pay off each of their debt a little bit each month. That isn’t normally the best way, as you will likely just be paying the interest. Instead, you should pay off your debts one by one. As far as choosing what order to pay them in, it is generally a good idea to start with the debt that has the highest interest, as this will save you the most on interest in the long run.
Click here for a more detailed look at interest rates.
Look into a Debt Consolidation Loan
If you are stuck with many different debts from multiple sources, it could be worthwhile to look into a debt consolidation loan. This will involve all of your other debts being wrapped into one, larger loan, which should be much easier to manage. You might even be able to consolidate at a lower interest rate. However, there are many risks associated with consolidation. For instance, once you’ve taken care of your other debts using your loan, you have to maintain responsible spending habits, as you will now have a whole new loan to pay off, which in itself can get expensive if not managed properly.
If your application for a debt consolidation loan gets denied, read this.
Consider Downgrading Your Car
One of the largest sources of debt for most people (outside of a mortgage) is a car payment. Oftentimes, people purchase a car outside of their price range and end up stuck paying hundreds of dollars a month for many years. If you want to get out of debt quickly, it’s a good idea to downgrade from your current car to a cheaper one. By selling your car, hopefully, you will be able to cover the remaining debt you owe. You may even have enough left over to purchase another car with a much lower monthly payment.
Is your car loan more than your car is worth? Click here to learn what you can do.
Do Your Best to Stay Out of Debt Going Forward
Once you are able to get out of debt, you should do your best to avoid bad debt going forward. You should only take on debt you can handle and never let it get out control. These lifestyle changes you made should stick and you shouldn’t go right back to the way things were before.
For more loans and programs to help you get out of debt, check this out.
If you follow the tips, steps, and tricks that have been laid out in this article, you will be well on your way to getting out of debt fast. Sure, it won’t be easy and sacrifices will have to be made. However, being debt-free is an amazing feeling and is something everyone should strive for. You will have much more money at your disposal and you will be able to save at a rate you never thought possible.
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Margaret Johnson is in the business of helping Canadians tackle their debt, deal with credit issues, and regain control of their finances.