Paying off debt is one of the biggest concerns of the ‘modern‘ people and debt on a low income is, unfortunately, something many face today.
Debt payment in itself is difficult, taking time and sacrifice, when your income is also low, the entire battle seems lost.
Just like many before me (and after), I was in debt.
And it wasn’t pretty.
One year after signing a very expensive car loan (which I could afford with my salary), the radio station I was working at closed down, leaving us all jobless.
There were no other similar jobs, I had to pay company taxes (I had a small ‘ltd‘ for my web design business) and a HUGE car loan.
How do I put it nicely? I was screwed.
My side-hustle turned into a full time career/business and, with the unconditional support from my amazing family, I was able to make it.
My debt story sits in the past, but the ‘teachings‘ will live with me for the rest of my life.
So, let’s get back to our main story: how can we pay off debt on a low income?
Have a plan
In my case the plan was to ‘survive‘ financially for the remaining 3 years, since I had fixed monthly payments and paying off in advance would have cost me more (some fees for early payment, which I wasn’t willing to pay anyway).
OK, let’s be honest, I had no money to pay off my debt at first, so there was absolutely no chance for me to ‘worry‘ about paying it off in advance.
If you are not like me and have various credit cards, student loans, mortgage etc., you’ll need to take a moment and list your debts, the monthly payments, interest rates and so on.
This would allow you to know exactly which loan ‘costs‘ you the most, which is easier to pay off etc., depending on the debt payment strategy you’ll choose.
Be willing to accept support
Whether it’s money someone dear is willing to give you (even for a while), a bowl of soup or a second-hand TV to replace the broken one in your home, don’t act too proud.
My family paid ALL my expenses (except for my company taxes, the car related expenses and phone bill), put a roof above my head and fed me those few months when I was barely making it.
Of course, as soon as my business started bringing me more income, I was able to pay my own bills and even bring money at home for our groceries, various home improvement projects etc.
Still, when I needed it the most, those first 3-4 months when I was barely making it to keep ‘afloat’, their support meant a lot to me.
So, if there’s anyone willing to lend you a hand, don’t say no.
Of course, when you are living on a low income, there aren’t many luxuries in your life.
Even so, it’s worth taking a second look. Even few bucks here and there can make a difference when it comes to paying off debt on a low income.
Back in the day, I kept my spending to a bare minimum, which allowed me to throw almost all my income to paying off my debt. Sure, when I started making more money, there was enough to indulge in a new camera, a trip to NYC etc.
Do NOT miss any payments
Missing payments means paying some hefty fees, which will knock you down, when it comes to your debt payments.
You’ll probably have to make the minimum payments on some of your debts, while trying to speed up payments on a specific one, but do not miss any payments, as much as possible.
You are already on a low income, barely making it, so any new fees you need to pay can be disastrous.
And again .. a personal anecdote:
Few months before ending my ‘contract‘ and becoming debt free, I started getting more relaxed with my payments.
I was actually making a good living and decided to ‘invest‘ in something more pleasant, thinking that the bank won’t take my car, when it’s almost paid off and so many people in my country can’t make payments.
Well, guess what, the bank had nothing against taking my car, 5 monthly payments before we’d end it all.
I was lucky to actually get them to re-open the contract (someone was very fast there with cancelling our agreement) and had to pay a hefty fee. Let’s say it cost me one of those monthly payments just to get back on track.
The good thing was that the unexpected fee was already something I could easily handle (my web design business was thriving, so it was just annoying, not a catastrophe), and yet I could have done something better with the money and not lose it like this.
So, DO NOT MISS PAYMENTS as much as possible. Avoid any fees you can by trying to make all the needed payments.
Try to earn more money
When you have a low income and debt there’s really not too much you can do to get afloat.
You are accepting help, you are not spending recklessly, you are abiding by your master-plan, not missing any payments and trying to minimize any new fees or interest rates, but there’s a big limit to what you can achieve and that’s because of your small income.
In my case, getting my small web design business up and running saved me.
It was my chance to earn better than ever before (even if the first few months were grueling). Income has skyrocketed compared to any of my previous wages and this allowed me to pay off my debt and have a lot of fun besides this.
In many cases this can just be a bit of a side income, that would allow for faster debt payment. In few cases it might turn into a new ‘life‘ for you, a new business that will help you achieve all your dreams.
Be consistent in your efforts
I’ve always compared personal finance to losing weight. Whether it’s paying off debt, saving money or trying to get healthier it’s all about a LIFESTYLE you need to choose from now on.
When you are trying to improve your financial situation, you need to take a good look at where you’re at and get ready for the marathon.
No plan, no matter how well thought, will work for your situation, if you are not willing to go the distance.
Paying off debt on a low income means not only having to make some HUGE adjustments, it also means being very consistent and never looking back.
Do you have a successful story? Are you currently paying off your debt? Care to share your experiences with us?