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How to Get Out of Debt on a Low Income When It Feels Impossible

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Learn how to get out of debt on a low income even when it seems impossible.

Being in debt can make your financial life feel pretty bleak, especially when you live on a low income.

If you’re living on a tight budget then things like buying a home or growing your savings can feel impossible when you’ve got credit card bills or student loans hanging over your head.

I’ve been there and done that. At one point I had close to $100,000 in debt which included a car loan, credit cards and student loans for not one but two degrees I never used.

Thankfully my debt is all gone now, except my mortgage.

But I spent quite a few years chipping away at it, several on them on a very tight income.

If you’re in the same boat, I want to help. Because being in debt SUCKS.

So I’ve got some tips that can help with how to get out of debt on a low income and live your best life financially.

1. Put the Brakes on New Debt

woman holding an empty wallet

You really can’t pay off debt if your balances keep growing every month. It just doesn’t make sense.

So if you’re serious about getting out of debt the first step is not adding to the problem.

That means no using credit cards to pay for things.

Or taking out payday loans to pay the bills or persona loans just because.

It means no new debt period unless it’s an emergency and you have no other option.

I’ll admit, this step is probably one of the hardest. But you can’t avoid it if you’re trying to get out of debt on a low income.

2. Know What You Owe

Seeing how much you owe can be a little stomach-churning, I’m not going to lie.

If you’ve been using credit cards or loans for years then it’s possible that you’ve accumulated a nice little chunk of debt.

But if you want to pay it off and stop being broke all the time, you’ve got to rip the band-aid off, so to speak.

So round up statements for all of your debts, including credit cards, student loans, car loans, personal loans, your mortgage and other loans. Then make note of:

  • How much you owe to each debt
  • The interest rate on the debt
  • Your minimum monthly payment
  • The actual amount you pay monthly for each debt and altogether
  • Your total debt owed

This is probably the least fun step. I know I really did not like seeing how much debt I had in black and white once I listed it all out.

But it was also a huge motivator for me to kick those debts to the curb so I didn’t have to stare at that ugly number anymore.

how to get out of debt on a low income

3. Create a Realistic Debt Payoff Budget

If you’re trying to figure out how to get out of debt on a low income then chances are you’re not going to be able to throw thousands of dollars a month at your balances.

So the next thing you have to do is figure out what you can realistically afford to pay toward your debt each month right now.

The goal here is to pay as much as you can above the minimum payment each month. Because paying just the minimums is a good way to get nowhere fast.

Here’s an example.

Say you owe $10,000 in credit card debt at an APR of 19.99%. Your monthly minimum payment is $300 or 3% of the balance.

At that rate, it will take you four years and two months to pay it off. And it’ll cost you just over $4,700 in interest.

I don’t know about you but it’s a no from me on both counts.

So if you want to know the secret for how to get out of debt on a low income, it’s paying more than the minimums as often as possible.

Say you come up with another $200 to put toward your debt each month.

Even if your interest rate doesn’t change, paying $500 a month toward your cards instead of $300 would cut your payoff time in half.

And you’d save about $2,500 in interest. That’s pretty sweet, right?

But what if you can’t afford to pay more than the minimums? That’s where the next tip comes in.

4. Lower Your Expenses as Much as Possible

woman paying bills

If you’re not living on a budget yet, then you’re not using one of the simplest and most powerful financial tools there is.

A budget can seem like a drag, right?

A lot of people think of it that way, as something that keeps you from doing what you want your money.

But in reality, a budget is the exact opposite. It’s a plan for taking control of your money.

If you don’t have a budget, go read this budgeting guide for beginners first. And if you do have a budget, it’s time to look at where you can cut spending.

Here are some easy ways to be frugal and cut spending without completely changing your life:

  • Invest in a pair of clippers and give your kids haircuts at home
  • Cancel cable and watch TV using low-cost streaming services like Hulu
  • Switch from a contract cell phone plan to a prepaid plan (Tello offers plans starting at $5/month!)
  • Stop going to the grocery store and use online ordering and pickup instead (saves you money on those impulse buys!)
  • Use only cold water to do laundry and switch to dryer balls instead of dryer sheets to save money
  • Turn off lights when leaving the room and unplug appliances you aren’t using
  • Use cashback apps like Rakuten and Ibotta to save money on purchases
  • Stick to finding ways to have fun as a family that cost little or nothing

These are all frugal habits I adopted as a newly single mom when I had a ton of debt and barely any money. And they’re all things I still do to save money so I know they work.

If the thought of going over your expenses is overwhelming, there’s an easy solution. You can use the Trim Financial Manager to find areas where you can save money.

Trim reviews your bank account activity and expenses to find wasted money. It’s personally saved me over $200 and I recommend trying it out if you’re having trouble finding the leaks in your budget.

For more money-saving ideas, read these posts next:

21 Things to Stop Buying to Save Money Every Month

37 Helpful Money-Saving Hacks for Living on One Income

100+ Best Frugal Living Tips for Families to Save Money

5. Make Your Debt Less Expensive

Here’s one of the most important things I’ve learned about how to get out of debt on a low income:

High interest rates can be a huge obstacle to reaching your goal.

Banks and lenders charge interest because that’s one way they make money. But that doesn’t mean you have to settle for paying steep interest rates on credit cards or loans and forking over all that cash.

Instead, you find ways to bring those interest rates down.

You can call your lenders or creditors and ask for a rate cut. That can work with credit cards if you’ve always paid on time and are a good customer.

But asking doesn’t always mean receiving.

So here’s what else you can do:

  • Transfer high-interest credit card debt to a new card with a 0% APR
  • Take out a low-interest rate personal loan to consolidate debts
  • Refinance your private student loans at a lower interest rate
  • Consider refinancing your mortgage while rates are low

All of these options can save you money if you’re able to qualify for a lower rate than what you’re paying now.

To get the best rates, you’ll need a good credit score. If you’re clueless about where you stand credit-wise, then head over to Credit Karma and sign up for a free account.

Credit Karma is a free credit monitoring service that lets you track your credit score and get alerts on changes to your credit file. I’ve used it to monitor my credit for years and it’s been helpful for paying off debt and on a couple of occasions, it’s also helped me to prevent identity theft.

Sign up for Credit Karma (no credit card required!)

Once you know what kind of credit situation you have, you can start shopping around for credit card and refinance loan offers.

And if you want to refinance student loans or get a personal loan to consolidate credit cards, I encourage you to check out Credible.

Credible is an online marketplace that allows you to compare rates quickly and easily, with no hard pull of your credit. That means no dings to your credit score.

Get a rate quote from Credible now!

6. Choose Your Debt Payoff Method

There’s more than one way to pay off debt. But one of the most popular options is the debt snowball.

The debt snowball is most often associated with Dave Ramsey. If you don’t know, he’s a personal finance guru.

Using the debt snowball method to pay off debt works like this:

  • List all of your debts from the smallest balance to the largest
  • Pay as much as you can toward the first debt on the list each month
  • Pay the minimum payment due on the rest
  • Once you pay off the first debt, combine that payment with the minimum payment due for the next debt
  • Continue rolling payments over until all your debt is paid off

What’s great about the debt snowball method is that it allows you to get a quick win when paying off debt.

If the first debt on your list has a $300 balance, for example, then you might be able to pay that one off in a month or two and move on to the next. This debt repayment method gives you momentum early on so you can keep going.

The other option is the debt avalanche.

The debt avalanche works the same as the debt snowball, with one twist. Instead of listing your debts from smallest balance to highest, you list them from highest interest rate to lowest.

Paying off debts this way means you save money on interest since you’re getting rid of the most expensive debts first.

You’ll hear some people argue that one is better than the other. I personally think that when you’re trying to figure out how to get out of debt on a low income, you should pick whatever works best for you.

For example, I chose the debt snowball because I needed the push from seeing some of my smaller debts go away relatively quickly.

But you can experiment with either one to see which suits you and your financial situation better.

7. Use Found Money to Pay Off Debt

woman pinning credit cards to a clothesline

Found money is basically any money you weren’t counting on in your budget.

So that includes things like:

  • Refund checks
  • Stimulus checks
  • Rebates
  • Bonuses you get from work
  • Returned security deposits

When you have extra money like this, whether it’s a few bucks or a few thousand dollars, consider putting all of it toward debt if you can.

You might be able to wipe out a good chunk of what you owe this way. But even smaller amounts make a difference so don’t let them go to waste!

8. Make More Money

Getting out of debt on a low income is not easy. And if we’re being honest, you may need to find ways to increase your income if you want the progress to go faster.

The good news is, there are so many ways to make extra money to pay down debt.

For example, you could:

  • Ask for more hours at work if you’re paid hourly
  • Get a part-time job on top of your full-time job
  • Negotiate a raise if you’re paid a salary

All of these things can put more money in your pocket. But if none of those are options for you, then a side hustle is the answer.

Side hustles are great you can make money on a flexible schedule. That’s perfect if you’re a stay at home mom who still needs to be there for her kids.

If you’re looking for some side hustle ideas to make extra money, these are my absolute favorite options:

Take surveys online. It doesn’t take a lot of time and you could easily make a few hundred dollars extra each month with sites like Survey Junkie and Swagbucks.

Use apps to save money when you shop. You can easily earn money back on purchases without having to do anything extra when you use apps like Rakuten and Ibotta.

Get paid to deliver groceries or food. Both require leaving home but you can make a decent amount of money in your spare time with companies like Instacart or DoorDash.

Declutter your house and sell the stuff you don’t need. Apps like Decluttr make it easy to sell things you no longer need or want. You get a clean house and cash in your pocket!

Get paid to write for websites and blogs online. Freelance writing is totally my jam and it allows me to make a comfortable income from home. Sign up for this free course to learn the ins and outs of how to become a paid writer.

Start a blog of your own! Blogging can be a great way to make money online if you know what you’re doing. Check out this complete guide to starting a blog for beginners with Siteground.

Get paid to proofread or transcribe. Proofreading and transcription are high-paying skills to have and you can do them both online. Here’s a free webinar to learn more about proofreading, plus one that’ll teach you the basics of transcribing if you’re interested in either one.

Become an online teacher. Teaching online is a great option for moms or anyone who has spare time and a subject they’re passionate about. I personally recommend Outschool for teaching online — teachers average $35 an hour!

Try becoming a virtual assistant. Virtual assistants help business owners run their businesses. That’s a really simple explanation but if you’re looking for something more detailed, check out Gina at Horkey Handbook who’s the go-to expert on becoming a successful VA.

Those are just some of the ways you can make money to help pay off debt.

For more ideas, read these posts next:

5 Legit Business Ideas for Moms You Can Start to Earn $5,000+ Monthly

10 Legit Ways to Make an Extra $1,000 a Month From Home

31 Best Side Hustles for Moms to Make an Extra $500 a Month

9. Include Saving Money In Your Debt Payoff Plan

family saving money

Having money in emergency savings can help you stay out of debt once you get out of debt.

When you have an emergency fund you can tap into, you’re less likely to have to turn to a credit card or loan to pay for an unexpected expense.

If you’re in debt payoff mode, you may not have much to save each month. And that’s fine to start.

But you can make the most of it by putting your money into a high-yield savings account.

High-yield savings accounts at online banks offer better rates than you could get at a regular bank. And they don’t charge as many fees either, which is great.

My personal pick for high yield savings is CIT Bank. They have one of the best APYs around for savers.

Check out the different ways to save with CIT Bank!

10. Get Help With Your Debt If You Need It

Sometimes, debt can just be too overwhelming. And no matter what you do, it’s a struggle to pay it off on a low income.

That’s when you might need to get help with managing debt.

Reaching out to a nonprofit credit counseling agency can help. Nonprofit credit counselors can help you come up with a workable plan for getting out of debt.

And if your debt is just too big, they may be able to suggest other solutions like debt consolidation, debt settlement or even bankruptcy.

Those options aren’t necessarily ideal, since they can hurt your credit score. But they can help you get rid of your debt when you’re absolutely buried.

man paying bills

What are your best tips for paying off debt on a low income?

Getting out of debt isn’t always easy, especially when you aren’t making a lot of money.

But it’s possible to pay off debt for good even on a low income if you’re committed to making it work.

Do you have a tip for paying off debt while living on a tiny budget?

Head to the comments and tell me about it. And don’t forget to pin and share this post!

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Hi there, I'm Rebecca, homeschooling single mom of two. I built a six-figure freelance writing business from home and now I teach busy moms how to make money, save money and master the family finances! I'm so glad you're here and don't forget to grab your FREE money-saving guide!

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