Getting out of debt is not easy for anyone, but it is a more challenging feat if you have a low income. Sure, you can pay off debts even when you are broke but not without making significant financial changes first. According to York Credit Services, here are tips on getting out of debt with low income.
Do not take on new debt
Suppose you borrow money from one source to pay your debt; you are just shuffling debts around rather than paying them off. Perhaps you plan to open a new balance transfer credit card to benefit from a 0% APR period or consolidate your debt into a single personal loan with a better interest rate. These may be good reasons to take on new debt. But you don’t need more debt.
Generally, if you are trying to pay down your debt, it is crucial that you do not take on new debt. Do not apply for loans or open any new credit cards unless there are strategic reasons to do so. It’s also recommended to freeze any unnecessary expenditure. This could free up more cash to help you pay down your debt.
Calculate the total amount you owe
If you feel overwhelmed by debt, it is tempting to ignore your bills. Facing your debt can be intimidating, but if you plan to pay it off, you must know how much you owe. Check every outstanding utility bill, credit card statement, or medical bill and add them up to know how much you owe. Do not forget to add late fees, possible penalties, and other debts that you are supposed to pay. Having a clear picture of your debt will help create a strategy to pay down your debt.
Create a budget
A well-thought-out budget is an essential tool that allows you to see exactly where your current income is coming from and how you’re spending it. Begin by listing all your sources of income. Next, list all your recurring fixed expenses such as car payments, rent, and other expenses that don’t change from month to month.
Get the difference between your total income and those recurring fixed expenses. You can allocate the remaining amount of money to variable expenses such as clothes, groceries, transport expenses, debt payments, and more. It is recommended to determine the specific amount of money you set aside every month for the variable expenses. Find opportunities to cut expenditure on things like groceries and earmark those savings for paying off your debts. Stick to your budget, and it will help you pay down your debt.
Seek debt management counsel
If you are deep in debt, it is possible that simple debt management solutions like creating a budget won’t work. In this case, it is best to consult with a reputable debt management agency to help you analyze your current financial situation and figure out what you need to do to get out of debt. Some debt management agencies offer financial advisory and help their clients draw a debt payment plan. Other options include exploring debt consolidation Toronto loans and debt relief programs.
