If you are on a low income or barely making ends meet, your dream of being debt-free may seem impossible to achieve. There are several reasons why people get into debt. Regardless of whether you’ve accumulated enormous credit card bills due to bad spending habits, medical bills, or student loans, debt can feel overwhelming. But, did you know that you can pay off every last cent of your debt? It won’t be that easy, but with some commitment and determination, you can get out of your debt and improve your financial situation.
In this article, we take a look at a few effective tips to help you get out of debt faster with low income.
1. Stop Borrowing
While it may seem a good idea to take on new debt to pay another, the truth is it doesn’t always work. We understand there are good reasons you may want to do this such as taking out a personal loan with a low-interest rate to consolidate your credit card balances. But in general, if you’re drowning in debt, you need to stop more borrowing and focus on paying your existing debts. Don’t apply for loans or open a new credit card unless there’s a strategic reason for doing so.
2. Determine the Exact Amount You Owe
If you’re drowning in debt, you may be tempted to just turn a blind eye on the bills that keep coming. Of course, facing what you owe can sometimes be scaring, but if you’re determined to pay it off, then you need to know the exact figure. So set aside some time and analyse your credit card statement, utility bills, medical bill and any other bill you have, and add up the figures to know what you owe. Don’t forget to add the interest rates, late fees and penalties to your principal balance. This way, you’ll get a clear picture of your financial situation to help you figure out how to start paying down your debt.
3. Deal with the smallest bills first
Digging yourself out of debt especially on a low income isn’t that easy, but you can ease your anxiety by paying off your small bills first to decrease the number of creditors. Take care of that £200 bill you have on your credit card or at your car repair shop. Seeing those debts go to zero will give you energy and motivation to keep going in the belief that you can be debt-free.
4. Tackle larger debts
Once you’ve dealt with the smaller debts, now it’s time to start paying down your large bills. Here, you can use the debt avalanche method, whereby you focus on paying first the debts with the highest interest rate. High-interest charges can greatly add to your debt, so dealing with the worst bill first can help you save more money to pay off other debts.
5. Find a Side Hustle
Another way to pay off your debt faster is to look for ways to earn more money. The internet has created plenty of opportunities that are available online, from online writing and dog-sitting to graphic design and ride-sharing. Just look for creative ways to utilise your free time, but ensure you put that extra cash towards your debt.
By following the above tips, you can get out debt in no time and save more money.