Can you even pay off debt while living on one income, especially if it is a low income? The reason why many people fail to getting out of debt is because they fail to plan.
Everyone has a dream to be debt free, to have money in your bank account and not have to worry when an emergency comes up that you will have enough money for it.
How can I pay off debt living on one income? Is it even possible or is what I read online too good to be true? It’s not too good to be true, honestly, it will be an adjustment and will not be easy but it is possible.
How Can I Do This?
Many people read these stories online about how people pay off debt and do it on one income and think sure that works for them but not for me. I thought that way once myself.
A few years ago, I was in $40,000 debt and I only made $23,000 a year. After 4 years, I’m now debt free and I’m here to tell you that ANYONE can and should get out of debt, no matter how little income they make. Here is how I made my dream of getting out of debt a reality.
1. Have an honest discussion.
If you are single, you need to have an honest discussion about what you want in life. If you aren’t single, then you need to have this discussion with your partner.
Start out by making a list of all your hopes and dreams for the future. Then, you can start making a plan to achieve them. After you list your wants, get real about your financial situation.
If you live on a low income like me, if you do not get change it and get out of debt, you are putting yourself in a very precarious situation. Read here for more on how to get out of debt. You have to change your mindset from “Why is this so hard?” to “How can I meet this challenge?”
2. Make a budget.
Recognize your own spending habits by writing down every expense, no matter how small it is. I love reading books and games, so much so that I’ve spend a lot of money on both.
Obviously, I had to stop this buying until I was out of debt. I reread books and played old games. I had to really think about how my habits impacted my plans for my financial goal of getting out of debt.
Now that you know what habits will sabotage your goal of getting out of debt. You will need to get very serious about distinguishing your needs from your wants.Now, you make a budget. I cannot say this enough, make sure you stick with it. If you don’t get it the first month or the next few months, don’t get upset, get back on track and make a plan on how you are going to get better with your money next month.
While I was getting out debt, I literally bought no clothes or spent any money on entertainment. I still don’t spend a lot on either of those items, even today because you have to be in the mindset to buy nothing, really nothing. However, it doesn’t mean that I gave up having fun. I just found alternative ways to have fun without spending money.
3. Choose a debt payoff method.
There are two main debt payoff methods, the avalanche and the snowball method. Let’s talk about the good and bad of both.
• Debt Avalanche
The debt avalanche method focuses on paying down the debt with the highest interest rate first. Of course, you are still making minimum payments to all your other debt but you are throwing everything else at the debt with the highest interest rate.
Start by listing out all of your debts, balance you owe, their interest rate and when they are due. Then organize them from the highest to lowest interest rate.
In this method, you save money in interest payments and are able to payoff the debt quicker. The downside is that you most likely are starting off with your biggest debt and won’t see a “win” for quite some time. Therefore, it can feel like it takes longer to pay down your debts using this method, even when the opposite is true.
• Snowball
The snowball method approaches debt in the opposite way than the avalanche method. Instead of listing your debt from highest to lowest interest rates, you list your debts by the lowest debt amount.
With this method, you are able to secure a quick “win” and you actually feel like you are making progress. Then, this gives you motivation to keep going and tackling your debt. Once, you pay off smaller balances, you then take that extra money to pay off the next bigger debts and so on. Hence, why this is called the snowball effect.
The downside to this method is that you pay more interest over time, which means you will be paying off debt longer than if the avalanche method was used.
Either method is fine to use when paying off debt. Whatever method you choose, it is based on how you want to approach paying off debt.
4. Set goals.
Setting goals makes you accountable and helps you to get out of debt and save money. Post them on your refrigerator for everyone to see. Also, tell family and friends that you are getting out of debt because they become your cheerleaders and can keep you motivated.
5. Save money.
You might be saying to yourself, “Wait, I thought I was supposed to use all my money to get out of debt, not to save money until I was.” While, you are going to be throwing most of your money at your debt, you want to save a little money even if it is $25 or $50 a month. You save money so you will have money so in the future you will not allow yourself to get back in debt. Work towards saving enough money for an emergency fund, which is 6-9 months expenses.
Another reason why you save money is you want to create a habit to start to saving money every month so that by the time you are out of debt, it will be just second nature and you plan it as part of your budget. The more and more you get out of debt, the more you can put away towards saving each month.
6. Live minimal lifestyle.
In living a minimal lifestyle will also help you to save more money, you live on less. This has been one of the best ways I was able to get out of debt and also save money. Living minimally does take some getting used to; you can start off with a no spend challenge to ease into it. Then, keep creating no spend challenges or weekends until you get used to the idea.
I started a no spend weekend. After I was successful with that, then I moved to a week, to 2 weeks and then a month.
Start clipping coupons and looking for items you use regularly on sale at all the different stores.
Find alternative ways to do things. It is much cheaper to stay in or visit with family and friends at each others homes than it is to go out socializing. By doing all this, I began to see that I don’t need everything like I once thought I did.
What if you save all you can and it still doesn’t work?
You might be saying, “Well, all that sounds great. But I barely make enough to live on, how am I going to throw any extra towards debt and save money?”
I know it’s tough but you have to get creative. Do you live in a city, do you really need a car? Or see if you can carpool with someone. If you can then sell your car, then use that money to pay down debt and save money. Then look at other items that you don’t use or need to live. Sell them.
If none of that is an option, you might want to consider getting a second job to bring in some extra money to help you get out of debt. You can do babysitting, cleaning houses, yard work and a lot of other ways to make some extra money.
Conclusion
I believe it is essential for every family to pay off debt and save money to have a positive financial future. Find a way to accomplish this goal otherwise, you live in constant financial stress, strained relationships, and give up your big dreams for the future. Who wants that?
You can get out debt while living on one income. It’s not always easy but it is possible through planning and dedication. Get to it, you can do it! Now, stay out of debt and keep saving!
Original article and pictures take enjoyingsimpleluxuries.com site
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