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How to Get Out of Debt on a Low Income

too much debt

One of the main reasons why people often have trouble getting out of debt is that they have a low income. After paying rent, groceries and utility bills, there’s often not much left over, particularly for making hefty payments towards debt.

Sometimes families just can’t make their financials work each month, despite wanting to stick to their debt repayment plans. Other times, individuals might only be able afford to pay the minimum payment due on their credit card, making becoming debt-free seem like a lifetime away. Regardless of the situation, there are still ways of getting out of debt even with a low income.

Get Help

The first step is to seek help from a credit counselling agency that has the resources and expertise necessary to develop a reasonable Debt Management Plan with affordable payments. A credit counsellor has the objectivity required to perform a fair analysis of your spending habits and your income. They also have the ability to negotiate with your creditors to decrease your interest rates and consolidate your payments into one affordable payment. Re-negotiating your debt may allow you to reduce your monthly debt repayment into a more manageable number, which can help you pay your debt off faster without having to increase your income.

Budget Accordingly

While it’s always easy to adapt to a bigger income, it is really challenging to embrace the hardships of a low or reduced income. Learning to live within more modest means can seem impossible, but discipline is key when it comes to getting out of debt. You need to understand that there is no quick fix to getting your debt eliminated. It probably didn’t happen overnight and won’t be fixed that quickly either. The only way out is to pay it off.

Budgeting, with the help of a credit counsellor, can help you better understand how you spend your money, and where it goes each month. A credit counsellor might be able to identify expensive habits that could free up an additional $50 to $100 each month, which you can then put towards your debt.

Cutting down on expenses is one of the best ways to pay down your debt when you find yourself with a low income. While it may seem impossible, there’s usually at least one of two areas in your budget where you can cut back. For example, is your cable package really expensive? Perhaps you can switch to Netflix temporarily or cut down on some channels. There’s always a way.

Avoid Further Debt

While it may sound simple, oftentimes people use credit to pay for everyday bills and expenses. Doing this will only put you into deeper debt. When you’re trying to pay off your debt, you should avoid adding any additional debt to what’s already existing, or you’ll just end up in a vicious never-ending circle. If you have to cut up your credit cards to avoid using them, then do so. If you have an accurate budget that you stick to, there is no need to use credit.

Getting out of debt on a low income is challenging, but not impossible. If you set out a plan, understand your budget and how you spend money, and have some discipline, you’ll find yourself out of debt in no time.

If you’re concerned about paying off debt, our credit counsellors can help. Contact us today for a free consultation.

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