Are you wondering how to pay off debt fast with low income?
The answer is surprisingly simple: start saving!
If you're in debt, don't worry. You're not alone.
In fact, according to a study by the Federal Reserve Bank of New York, an estimated 44% of Americans have credit card debt and 36% have student loans.
Having debt is holding a lot of people back from building wealth but we are here to help change that narrative.
In this article, we will outline the best tips and strategies on how to pay off debt fast with low income.
These are some of our best tips and how we paid off $460,000 in 4 years.
Let's get into the details on how to pay off debt fast with low income.
Focus On Where You Currently Stand Financially
The first thing to focus on is where you are currently financially. This may be hard for you to be honest with yourself but it's necessary to start making financial progress.
It's important to figure out how you got into debt or why you don't have good money management skills.
If you do have good money management skills, then it's time to take your finances to the next level by investing and building wealth.
Regardless of where you stand today, it's time to start taking action and making progress so you can focus on how to pay off debt fast with low income.
Use a Budget to Track Your Income and Expenses
If you want to pay off debt, it's time to start forecasting your income and expenses.
How can you forecast your income and expenses? It starts with setting up a budget.
A budget will help you track your income and expenses so that you know where all of your money is going.
This will be important if you want to learn how to pay off debt fast with low income because it's hard to stay on top of what you owe if you don't have any clue about how much money is coming in or going out.
Some people find budgets helpful for this reason but some people find them restrictive.
How do you find the right balance for yourself?
To find the right balance, ask yourself what's most important to me: having more money on the side or having less debt?
Most people will think that it's better to have more money on the side and if you're among those who feel this way, then we suggest using a budget.
If paying off debt is your top priority and you want to be financially flexible with more of your income, then consider creating a budget with some spending categories.
This will give you some freedom to enjoy some of your money while still paying off debt. But, the amount you enjoy shouldn't be a large amount so it doesn't hurt your other financial goals.
Related reading: Budgeting 101: How to Create a Budget
Review Your Recurring Bills
As a financial goal, you should also review your recurring bills when focusing on how to pay off debt fast with low income.
How often do you review your recurring bills?
How much money are you spending on your monthly bills?
How can you find ways to lower what you're paying for your monthly bills?
Do you have any options to lower your monthly bill costs? What about lowering how often or how many times per day that certain utilities are being used.
The less energy that's being used, the lower the bill will be.
If you want to pay off debt fast with a low income, one way is to cut down on your recurring bills and save more money in the long run.
What would happen if we were able to reduce our monthly utility bill by 10%?
How much would this save monthly? How much would this save annually?
We saved $500. How did we do that you ask? It was all about timing and cutting down on energy costs for us!
Cut out the Unnecessary Spending in Your Life
You should also cut out unnecessary spending from your life when learning how to pay off debt fast with low income.
This may be hard to hear but if you want to pay off debt fast with a low income, it's time to cut down on some of your expenses.
When you're in the process of paying off debt, there are going to be small sacrifices that have to be made but they will allow you to save money for things like investments and building wealth.
Keep Track of Your Debt Totals
If you want to pay off debt quickly, it's important to keep track of your debt totals.
Ask yourself how often do you review your debt totals?
If you don't know how much debt you currently have it's hard to even create a plan to pay off debt.
It's important to know your total debt because it will help you create a plan on how much money you can spend towards paying off debt each month.
If you have $60,000 in outstanding balances and the average interest rate is around 13%, then what would the monthly minimum payments be? How long does this amount of time take with these monthly payments? How much interest will be paid over the life of this loan?
These are the type of questions you need to ask yourself when evaluating your debt totals.
How to Cut Costs
To pay off debt fast, you need some help, right? Your budget will reveal exactly where you spend your money.
Be honest and realistic with how you spend your money. Are you spending too much on food delivery? Is that gym membership being used consistently?
If you answer yes to those questions you need to decide what costs can be cut?
Here are some areas you may be able to cut costs in:
Spend Less On Eating Out
If you want to pay off debt fast, eating out is something that needs to be cut. How many times per week do you spend money on food? How much is spent per month on eating out? How much more would you have for debt if you stop eating out?
This spending category hurts a lot of people's budgets and is an easy way to save more money.
Buy Generic Brand Items
Generic brand items are less expensive than the name brand version. In some cases, the generic brands may have a similar quality to the name brand product.
Meat is a good example of this. You can buy a generic cut of meat for a fraction of the price and it tastes just as good as a more expensive product from a more expensive company.
Coffee is another example of where you can buy generic brands instead of name-brand products. Who knows the difference in taste?
Generic items are less expensive and save your budget money and that is how to pay off debt fast with low income!
Limit Your Monthly Subscriptions
If you're looking for ways to pay off debt faster with a low income, cutting down on your monthly subscriptions is another way of trying to save money.
You may be subscribing to services that you don't really need or even use.
As online shopping becomes more popular, the number of monthly subscriptions keeps increasing.
How many times per month do you shop on websites like Amazon? How much are these purchases costing per month? How much more could you save on your debt with the amount that's currently spent on these monthly subscriptions?
These are all important questions to ask yourself when it comes down to saving money and paying off debt fast.
Consider Refinancing Your Student Loans
Refinancing your student loans is a way to save on interest rates and pay off debt fast.
How much does your monthly student loan payment cost per month?
How much more could you save on what you owe?
How quickly could you pay off this loan if you refinance it with another company?
Refinancing your loans is a way to cut down the total amount of interest paid over time.
How long would it take before the monthly payments saved up enough interest to where your finances will be sustainable again?
Refinancing is just one way that you can pay off debt quickly. You can also become more disciplined and start making extra payments towards the principal balance in order to get out of debt quicker!
Get great rates on refinancing your student loans with LendKey. Save thousands by refinancing your federal and private student loans with their network of banks and credit unions who want you to succeed.
LendKey is a highly rated company and has a 4.6/5 on Trustpilot and an A+ rating on BBB. LendKey is our recommended student loan refinancing company.
Their process doesn’t require a hard credit pull. So, your credit will not be affected in any way.
Find Ways to Increase Your Income
If you are looking for ways how to pay off debt fast with low income, the best thing that you can do is to find ways to increase your income. How much more money would be coming in per month if you find a side job?
The more money that is coming in will make it easier for you to pay off your debt and make your income sustainable.
However, when it comes down to finding ways to increase your income, there are some things that need to be considered beforehand:
- How much time would this new side hustle take out of your day?
- How much more time does this side job take than what you currently make at your main job per week/month?
- How many hours would be lost with family and friends because all attention is now on the extra income?
This may mean less quality time spent together as a family or as friends.
How important are these relationships to you? How important is it for this extra income to be coming in as soon as possible?
These are all things that need to be considered before taking on a side hustle.
Sometimes, the cost of making more money outweighs what we actually make and how much time we spend with our loved ones. Weigh out your priorities carefully.
Related reading: 20+ Ways How To Make An Extra $1000 A Month
Final Words - How To Pay Off Debt Fast With Low Income
The first step to paying off debt fast is figuring out how much you owe and living on a detailed budget.
Learning how to pay off debt fast with low income starts with creating a plan that works for you.
Personal finance is personal and there's not a one-size-fits-all solution.
Make sure to do your research and find a plan that works for you.
Do you feel that you have a good plan for paying off debt? Why or why not?
Let us know in the comment section!