3 Steps to Reduce Debt with Limited Income
Is your income holding you back from paying down debt?
It may feel like necessities such as housing, groceries, and transportation are consuming your cash flow. So how can you pay down debt if you feel like you’re struggling to put food on the table?
Reducing debt with a limited income is certainly a challenge. But if you know the right strategies, it’s an obstacle that you can work to overcome. Read on for tips that can help you pay down debt, regardless of how much you earn.
Budget debt payments first.
The next time you sit down to budget, start by allocating money for reducing your debt. It should be your number one priority. Then, budget for essential living expenses like housing, utilities, and groceries. If you need more cash flow, cut down on non-essential spending like dining out and purchasing new clothes.
Start a side gig.
If cutting expenses alone doesn’t free up enough cash, explore ways to make more money. That doesn’t always mean starting a second job—after all, this is the golden age of side gigs! Here are just a few hustle ideas for your consideration…
■ Resell books, clothes, and shoes you might pick up from the thrift store on eBay
■ Rideshare or deliver groceries and food
■ House sit, babysit, or pet sit for friends and neighbors
Ultimately, your ability to earn an income is only limited by your creativity in solving problems. What other opportunities are there for you to help others and earn extra income?
Make more than minimum payments.
Your debt will linger if you make only minimum payments. That’s because minimum payments are nearly erased by interest. You make a payment, but the interest may put you almost right back where you started.
Instead, choose one debt to eliminate at a time. You should start with the one with the smallest total balance or the highest interest rate. Keep making the minimum payments on your other debts, and target that one debt with the rest of your available financial resources. Once it’s gone, choose the next smallest balance. Rinse and repeat until your debts are gone.
The biggest takeaway is that if you’re working with a limited income, paying off debt has to become your number one financial goal. Devote as much of your budget towards it as possible and increase your earnings if you have to. But it’s well worth the effort—once your debt is gone, you’ll have significantly more income for building real wealth!