If you want a debt-free life with a low income, here are 8 effective strategies to be debt-free with a low income.
8 effective strategies to be debt-free with low income
Getting out of debt is not a very easy task, it is just a type of trap. And if you have a low income, it becomes more difficult.
I’m going to tell you some of the effective strategies to get out of debt with low income that will help you to get rid of debts.
If you want a debt-free life with your low income, these tips by SPV Mortgages will guide you to get out of your debt.
Before going ahead let me tell you what those strategies will help you to get out of the debt.
- Understand Debt Paying off Methods ( Debt Snowball, Debt Avalanche)
- A Proper Analysis
- Balance Transfer Credit Cards
- Don’t Acquire New Debt Just to Pay off Old one
- Do not focus on more than one debt at a time
- Consolidation of Loans
- Cut out extra expenses and save as much as you can
- Build Side Income
Let’s get started.
Strategies to Get Out of Debt With Low Income
To get out of debt, you need to apply the strategies that will help you to get out of debt when you have a low income.
Let’s know what are those strategies:
Understand Debt Paying off Methods ( Debt Snowball, Debt Avalanche)
There are different strategies like Debt Snowball and Debt Avalanche that help you to get out of the debt.
Let me quickly tell you what debt snowball and avalanche methods are and how they work.
Debt Snowball is derived from the method of building a snowman in a yard.
If you remember when you used to make snowmen in your yard, you used to take some small snowballs earlier, and with that, you used to make snowmen.
Just like this when you start paying off your debt, first find the small part of your debt and start paying off that small amount of that debt.
And on the other side, keep finding some opportunities to make money. Keep repeating it until you completely get out of your debt.
The debt avalanche is somewhat opposite to the Debt snowball method. In the Debt Avalanche Method, a debtor first starts paying off their high-interest debt and repeats it until a debtor gets out of the debt.
A Proper Analysis
The first step to getting out of debt is to know why you are in debt and how much debt you are in.
The proper analysis of your debt is very important. Figure out the reasons for debt, amount of debt, interest rate, number of loans, and time period of debt.
Write down all these things in Google Spreadsheet or in blank paper if you are a traditional one.
Now make a plan that will include the strategies that are mentioned below for getting out of your debt.
Balance Transfer Credit Cards
Moving out all the credit card debt into the new credit card that has different types of offers and rewards for you.
The method of Balance Transfer Credit Cards is somewhat similar to balance transfer credit cards. But, in this method, you just keep moving your money into different credit cards so that you can get out of the debt.
But, the method of balance transfer on credit cards can hurt your credit score. It is a beneficial method when you find a credit card that doesn’t apply interest rate on transferred money.
Don’t Acquire High-Interest Rate New Debt Just to Pay off Old one
If you are doing this mistake, believe me, you will never get out of the debt.
Acquiring high-interest new debts just for paying off the previous old debt will make you stuck in the debt trap.
Many people think that consolidation of loans means acquiring a new debt just to pay off the old debt. But, this is a misconception.
When you consolidate all your debt into a new loan, you take one step toward getting out of debt because a new consolidated loan has a low-interest rate as compared to that of the previous one.
But, never acquire a high-interest rate debt to buy or pay off your old debts.
Do not Focus on More Than One Debt at a Time
It is one of the biggest mistakes that I have seen people doing very often while trying to get out of debt.
But unfortunately, they remain stuck in debt due to this mistake.
You can never pay off all your debt at one time if you have a low income because it’s not possible. Be practical.
I am sure you took the loan because your income was not enough. Do you think you can pay off all that debt just in one night?
It’s not possible.
Instead, try to focus on debt on time. Figure out the small part of your debt that you can pay off easily with your current income.
When you will completely pay off that small part of your debt, you are free from paying off interest for that amount of debt and this will help you a lot in paying off the remaining debt.
Sometimes when you focus on one debt, you may start getting the penalties of late payments of other debt.
But, when you completely pay off a small amount ( even 1% ) of your debt, you have taken one step toward getting out of the debt.
Consolidation of Loans
You might have taken different types of loans like student loans, personal loans, and car loans that have very high-interest rates.
In such a case, consolidating all your loans into the bigger loan will help you a lot to get rid of all your debts.
Consolidation of loans is something that is very basic for getting out of debt but most people ignore or forget about it.
Consolidation of loans is quite easy, you have to just find a new single loan that can pay off all your rest of the debt with a low-interest rate. All your debt will be consolidated into the new and bigger ones.
You can easily get a loan that has a low interest rate if you have a good credit score but if you have a bad one you have to do a little bit to find a loan with a low-interest rate.
Now, you have to pay off only one debt with a lower interest rate and it can save your money a lot.
The mindset of most people who try to get rid of the debt is to pay off your just with any magic that doesn’t exist.
The journey of paying off the debt starts by saving and making a little amount of money.
And you can use that money that is saved from the consolidation of loans in stocks, and bonds, or pay off your remaining debt.
Like you can invest that money in stocks and bonds or you can just pay off the small part of your debt with the help of money that you have saved with the consolidation of loans.
Build Side Income
Since you are facing the problem of low pay, you should create a side income that can help you get out of debt faster.
And believe me, the biggest factor of getting into debt is low income, as your income is low, you have to take on debt to survive.
But, you must make sure that your side work must not disturb your main work.
What I mean to say is you should give first priority to the main work that you are doing right now. Don’t leave your current job or work just to try out these side hustles.
Once these side hustles start making a good amount of money you can start giving more time and effort to these side hustles too.
Cut out Extra Expenses and Save as Much as You can
You can use different money management that automatically tracks your expenses that are purchased with the help of your credit cards.
Use the best apps that will help you to save your money while shopping online in any store.
Open Google Spreadsheet or use blank paper to write down your all monthly expenses.
After writing down all your monthly expenses, try to figure out the expenses that are extra or of no use. It is the best way to figure out all your extra expenses that are done with and without your credit cards.
Conclusion
And here you have 8 effective strategies to get out of debt when you have a low income.
Now I would like to know your opinion:
Which strategy are you going to try first?
Are you going to consolidate all your loans?
Or are there any more effective strategies to get out of debts that you know?
Either way, let us know your opinion in the comments section below.