Are you wondering how to pay off debt with no money? According to Pew Charitable Trusts, 80% of Americans carry some form of debt, so you are not alone.
It's hard to come up with a way to pay off your debt when you’re living paycheck to paycheck. Even if you get an annual raise, it still doesn't seem to help. Here’s the thing, it’s not how much money you make, it’s how much you keep.
You have to have a plan to manage your money, or you're always going to be broke. It’s true that having a higher income can make it easier, but I’ve known doctors, and lawyers that have ended up broke because they didn’t have a plan for their money.
No matter where you’re at now financially, there’s a way to get where you want to be. You don’t have to be a financial genius, but you do have to be willing to take action to conquer your debt.
Achieving your financial goals is easier if you have a decent income. You can probably get out of debt by making a few cutbacks and creating a budget. However, if you have a large amount of debt, you might want to consider picking up a temporary side hustle until you meet your goals.
1. Create A Plan To Pay Off Your Debt
One of the most important things you can do is create a plan to pay off your debt. There are a variety of different strategies that people can use including the debt snowball and debt avalanche methods.
Start by listing all your debts, including the interest rate and monthly payment for each. Then, prioritize your debts. This will help you focus on paying off the debt that's costing you the most money first.
Once you've prioritized your debts, it's time to start making payments. If you can afford it, try to make more than the minimum payment on your debt each month. This will help you get out of debt faster.
Additionally, be sure to make all of your payments on time. Late payments can damage your credit score and make it harder to get out of debt.
Debt Snowball Method
The debt snowball method is a Debt Reduction Strategy where you focus on paying off your smallest debt first while making minimum payments on your other debts.
Once your smallest debt is paid off, you move on to your next smallest debt. The goal is to pay off all your debts, from smallest to largest. The debt snowball method can be effective because it gives you the motivation of seeing progress quickly by paying off your smaller debts first. This can help to keep you motivated and focused on your goal of becoming debt-free.
Additionally, as you pay off each debt, you will have more money to put towards your remaining debts, which can help accelerate the process.
If you are struggling with debt and are looking for a way to become debt-free, the debt snowball method may be right for you.
Debt Avalanche Method
The debt avalanche method involves paying off debts with the highest interest rates first. The advantage of this approach is that it can save you money in the long run by reducing the amount of interest you pay.
However, some people find it difficult to stick to this method, as it can require making large payments on high-interest debts. Another downside is that it can take longer to become debt-free if you have a lot of debt with high-interest rates.
Overall, the debt avalanche method can be a helpful tool for getting out of debt, but it's not right for everyone. You should consider your own financial situation and goals before deciding whether or not to use this method.
2. Tackle Credit Card Debt
Credit card debt is a major problem for many Americans. Millions of people each year struggle to make their monthly payments. As a result, they are forced to pay high-interest rates and fees, which can add up quickly. If you find yourself in credit card debt, there are a few things you can do to get out.
- First, try to pay more than the minimum payments each month. This will help you reduce your debt more quickly.
- Second, make a budget and stick to it. This will help you avoid using your credit cards for unnecessary purchases.
- Finally, consider credit card balance transfer to a lower-interest card. This can help you save money on interest charges and get out of debt more quickly.
If you are struggling with credit card debt, don't be afraid to seek help from a credit counselor or clergy member. They can offer advice and support to help you get back on track.
3. Create A Budget
When managing your finances, one of the most important things you can do is create a budget. This will help you keep track of your monthly income and expenses and ensure that you can stay on top of your payments.
There are a few different ways to approach creating a budget, but one of the simplest is to start by listing your monthly income and then subtracting all your monthly expenses. This will give you a good idea of how much money you have left over each month and whether or not you need to make any changes to your spending habits.
Once you have a budget in place, review it regularly and make adjustments as needed. This will help you keep your finances on track and avoid any surprises down the road.
4. Avoid Creating Any New Debt
One of the best pieces of financial advice is to avoid creating new debt. This can be difficult, especially if faced with an unexpected expense or emergency. However, there are a few things you can do to resist the temptation to put charges on your credit card:
- Try to save up an emergency fund to have cash available to cover unexpected costs.
- Make a budget and stick to it. This will help you be mindful of your spending and ensure that you are only spending money on essentials.
- Consider talking to a financial advisor who can help you create a plan for getting out of debt and avoiding new debt in the future.
5. Find Ways To Cut Expenses
One of the best ways to save money is to cut expenses. There are several ways to do this, and the best method may vary depending on your circumstances. However, some general tips that can help include:
- Cooking at home instead of eating out.
- Shopping at discount stores.
- Looking for deals and coupons.
- Reduce your cell phone bill.
You may also want to consider cutting back on luxuries or non-essential items.
For example, if you have cable TV, you could consider switching to a cheaper package or dropping it altogether. If you have a gym membership, you could cancel it and start working out at home.
By carefully evaluating your spending and finding ways to cut back, you can save yourself a lot of money over time.
6. Stay Motivated To Make Monthly Payments
Getting out of debt can feel like a never-ending process, but it is important to stay motivated throughout the journey.
One way to do this is to set small, achievable goals. For example, rather than trying to pay off all of your credit card debt at once, focus on paying off one card at a time. Or, if you are working to pay down a student loan, break the loan into smaller chunks and focus on making progress each month.
It can also be helpful to keep a Debt Reduction Tracker to see your progress. Each time you make debt payments, update the tracker and watch as the balance gets smaller and smaller. This will help you see your progress over time and motivate you to keep going.
Finally, remember that there will be setbacks along the way, but don't let them derail your entire plan. Stay focused on your goals and keep moving forward until you are finally debt-free.
7. Consider Debt Consolidation
Debt consolidation can be a helpful tool for managing debt. By consolidating multiple debts into one loan, you can often get a lower interest rate and save money on monthly payments. Debt consolidation can also make it easier to keep track of your debts and make payments on time.
However, a debt consolidation loan is not right for everyone. Before you consolidate your debts, it's important to understand the pros and cons of a debt consolidation loan.
For example, consolidation will not improve your credit score if you're already behind on payments. And, if you use debt consolidation to pay off high-interest debt, you could pay more in interest over time. If you're considering debt consolidation, talk to a financial advisor to see if it's the right choice.
8. Keep A Positive Mindset
When your income is low, it’s hard to believe that it’s even possible for you to get out of debt. But positive thinking makes it easier to take the action necessary to pay off debt and increase wealth.
Start by being grateful for your current situation. Maybe you have a job that doesn’t pay a lot, but that’s better than being unemployed, so be thankful for the job you have. No matter how small, find something positive about your current financial situation and be grateful.
Watch what you say. Stop saying things like “I am in debt and have no money,“ or “I’ll never make enough money.” Bring your positive mindset to life by saying aloud the things that you want to happen.
For instance, say things like “I am wealthy,” or “I make great financial decisions.” If you are negative, defeated, and don’t believe that you’ll succeed, then you won’t. You need to take this step seriously, with positive words, and positive thoughts, and you’ll be debt-free before you know it. You can do this; this is how to pay off debt!
9. Increase Your Income
If you didn’t have any money left over to start paying down your debt or if you want to speed up the process you need to create some additional income.
One thing you can do for some quick cash is to sell some stuff. Most everyone has things around the house that they don’t need or want anymore. If you’re already down to the bare bones, here are some ideas for finding things to sell as well as how to sell them.
Consider getting a part-time job delivering pizzas or cutting grass. Take surveys online to make money while you're watching tv or waiting in line at the store. Try one of these things to create additional income streams.
Look for a higher-paying job or a work-from-home job that doesn’t require you to spend additional money commuting to and from work. Consider asking for a raise at your current job.
10. Ask Your Creditors for a Lower Interest Rate
If you're struggling to pay down your debts, one option is to ask your creditors for a lower interest rate. This can effectively reduce your monthly payments and put more money towards paying down your principal. To increase your chances of success, it's important to understand how interest rates work and to approach your creditor with a calm, confident demeanor.
Interest rates are determined by several factors, including the economy's well-being and the borrower's creditworthiness. Your credit score will likely take a hit when you're struggling to make payments. This makes you less attractive to creditors, who may hesitate to lower your interest rate. However, it's still worth asking – especially if you have a history of timely payments.
When requesting a lower interest rate, be polite and humble. It's important to remember that you're not entitled to a lower rate and that the creditor is under no obligation to agree to your request. However, by approaching the situation calmly and rationally, you improve your chances of success.
11. Avoid Fees
No one likes paying fees, but sometimes they're unavoidable.
- Late fees, for example, are often charged when a bill is paid after the due date.
- Overdraft fees can be charged when there's insufficient money in a checking account to cover a transaction.
- And ATM fees can be charged when using an out-of-network ATM.
While it's not always possible to avoid fees entirely, there are some ways to minimize them. For instance, many companies offer discounts or incentive programs for paying bills on time. And many banks offer free checking accounts with no monthly maintenance fees.
By taking advantage of these opportunities, you can keep more of your hard-earned money in your pocket.
Final Thoughts On How To Pay Off Debt With A Low Income
If you're in debt and don't have any extra money to put towards your payments, there are still steps you can take to get yourself back on track. Start by evaluating your spending habits and creating a budget to help you make more headway against your debt.
You may also consider getting a side hustle or working overtime to bring in some extra cash. And finally, don't be afraid to ask for help from family or friends – they may be willing to lend a hand (or even some money) to help you pay off your debts.
What strategy will you use to start paying off your debt?