Even when you have a lot of money coming in, it can be difficult to escape debt, even more so when you are living paycheck to paycheck. Yes, it is difficult, but it isn’t impossible. It is very possible to escape debt even when you are on a tight budget. If you find yourself overwhelmed by debt and convinced you could never escape it – we are here to tell you it is possible while showing you how. In this article, we will look at different ways you can dig yourself out of debt on a low income.
Write down all your debts
The first step to financial freedom is to take stock of all the debts – you can do it on a computer or traditional paper. When noting your debt, ensure that you list the amount you owe, the interest, monthly payments, and other features. Doing this will help you get a full picture of your financial situation with the numbers to back it up. You have to acknowledge all the debt you have, from the smallest to the biggest. Once you’ve done this, the next thing to do is develop a debt reduction strategy – this will involve making a plan to figure out which debt to tackle first.
Evaluate your spending habits
It is very important that you review your spending habits so you can know what exactly you are spending your money on. Once you are able to pinpoint what you spend your money on, you can review the things that are taking a large percentage of your money. If the costs are unnecessary – it might be time to change some of your spending habits. Try to spend money on things that you absolutely need because if you keep spending anyhow, the chance of escaping your debt is very small.
Make a budget
The best way to keep your debt under control is by making a budget. You can allocate your income easily once you know your debts and your expenditures. A good way to stay on track is by adhering to a strict budget – this means that you will not be able to spend more than you allocated for each expense. Making a budget will make it easier for you to save towards paying off your debts. It also helps you know which expenses to cut so you can reach your goal.
Avoid taking more debt
You should really stop taking on more debt, especially when you are trying to pay off the debts you owe. Taking on more debt will do your finances more bad than good in most cases. So, if you want to escape your debt with your limited resources, you should really avoid taking on additional expenses.
Pay Above Minimum Payments
If you keep making the minimum payments and nothing higher, you might never be able to escape debt. If you want to be able to get out of debt, the best step to take is to make higher payments monthly. Use the snowball method: List your debts from smallest to largest, pay the minimum on each debt, when you pay off the smallest debt, put that money toward the next debt.
If debt is something that is controlling your life, you need help. The Debt Relief and Education Foundation has pro bono lawyers waiting to help you find financial freedom. Contact The Debt Relief and Education Foundation today for a free consultation.