How To Pay Off Debt on a Low Income

Debt

I want to share something personal with you it's very practical as well, I want to talk about how to put together a budget to pay off your debt when you're in a very low income. These 8 tips are not relevant to everybody, so if you're reading this from anywhere in the rest of Europe or in the States, the 8 tips might not make that much sense to you.

Read: How to Get Rid of Credit Card Debt Fast

But i want to talk about how to categorize your spending so I hope this article will make sense and give you some ideas and encouragement on how to actually pay off your debt when you have a low income because it can feel like you have this big hole in front of you and you're trying to fill it with small little pennies


1. Housing

You're either paying rent or you're paying a mortgage. If you're paying your mortgage then you might consider if you're in a really tough situation and you have a lot of debt and you can see that your income will be pretty low for a long time, then you might consider selling that house and getting an apartment instead.

It might seem extreme to give up your nice apartment and move to something smaller, but I guarantee you in first year or two, you will have saved a lot of money and to be able to pay that off, the debt, will really make a big impact

I'm not telling you to run out and sell your house, I'm just telling you to consider what are your options. This is not for everyone - but this is what some people choose to do to make it go faster. 

It might not be for you but you might have other options, just take a good look at what your options are and you're going to probably have to sacrifice something.


2. Food And Household Items

It's general groceries and everything you get in a grocery store, This is something I really struggle with over the years. I tend to spend more on food than I plan for, so this is one area where I've always had to restrain myself and be extremely disciplined.

A few things that you can do to help your money go further in this category is, of course, to make things yourself, cook at home, cook your meals yourself, even the lunch and the breakfast ones. One thing that's really important here is to not shop when you're hungry.
If you go to this grocery store when you're hungry you're always going to end up with extra things, so eat before you go to the grocery store
Obviously, you have to eat properly and get all your nutrition, but try to be creative in this area.


3. Transportation

Most of you might have a car, some people don't. I didn't have a car when I was paying off my debt. I have good transportation and it's really easy to save the bill, if I did have to go somewhere further away I have to take the trains and the ticket price are kind of expensive and renting a car can also be costly. But it was just a good way for me to stay flexible and keep my monthly bill down

Another option is to maybe sell your car if you really need a car then you might be able to take some of that money and buy an older car with cash, and use that difference that you get out selling your car to pay off your debt faster, it goes a long way whatever money you can rack up to put towards debt really makes a big difference.


4. Lifestyle

This includes your phone bill, your TV, Netflix, any kind of subscription, clothes, everything. And my monthly budget for this was $300, this might not sound like a very fun plan but you do have a lot of options to cut costs in this category. You can get rid of your cable, you can quite subscription to Netflix maybe HBO whatever other subscriptions you might have

It could be magazines and stuff. You can go to a friend's house and watch or you can watch some of the movies that you've already purchased during the years. There are many options for entertainment, even though you might be without your cable for a while. Keep in mind you can always start up your Netflix or HBO again later when you have a little bit more money every month.

Maybe just think of it as something you do without for a few months, six months, or a year maybe two years, and then you join them again.

I highly recommend that you use the pocket money method when you're doing this if you're a couple because this really gives you kind of a little bit freedom and wiggle room to decide for yourself


5. Miscellaneous

One thing that is completely sure is that something is going to come up, and you just don't know what it is. I budget $60 every month for this and I always like having it there. Putting even just a small number aside every month will give you a little bit of a cushion so it doesn't throw you off and you can regain your strength really faster and stay on your budget.


6. Have A Budget Account

I put $165 each month in a budget account and this the cover insurance, dentist, presents for birthdays, and Christmas. You know they're coming and they come around every year so plan for them so it doesn't become stressful

It's important this way that when you have to go out and buy the present, you stick to the budget that you've already decided at the beginning of the year because if you overspend on every single little present then your budget won't stick

Stick to the budget that you set, if your insurance goes up then you have to go back with the budget


7. Emergency Fund

Save some extra cash every month into an emergency account just to put a little bit wiggle room between you and whatever might happen, i didn't do this but I would really recommend that you do it even if you can save up $20 a month it really goes a long way for giving you peace of mind that if something happens then you'll have at least some money saved up to put towards that.


8. Pay Off Debt

The last part is to pay off your debt and try to increase your income if at all possible. I made a minimum payment on everything and that was $1,200 a month. Then I took whatever extra I made and put towards the smaller debt, this is a really good idea because when you pay off the smaller debt then you gain momentum faster

Every time you pay off a smaller debt then you get this victory and it gives you kind of a positive boost of energy to keep going and pushing through and you really want to get to the next one and it keeps you kind of competitive with yourself



That's it, folks, that's everything I wanted to share with you I hope this article isn't too long but there's a lot of say about budgeting and getting out of debt in general.

Author:

Hi, i am Micheal, the guy behind Roadtosuccesse. I share tips and tricks to help take a business to the next level, show which systems I personally endorse and use, share what I learn as a student of the game, and help people with personal development so that they can reach their full potential.

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