Having a low income is not an excuse not to pay off debt. The lender will never accept the excuse that you have a meager income, which is why you can’t pay off your loan. In the first place, you cannot take out a loan if your income is not sufficient to pay off the debt. But of course, life takes its own course, and so we sometimes do not have enough to pay for the minimum required amortization in a month.
So there are some tips on how to pay off debt fast with a low income.
List down all your expenses
This is going to be taxing but you really ought to work hard over something you want to achieve. So you want to pay off a loan? Then you have to do something about it, and listing day-to-day expenses will help give you clarity over what you spend money on. Take note of even the smallest expense like the bubble gum you purchased just because you thought your mouth stank. When you make a habit of listing down all your expenses, you’ll soon realize that there are some items on the list that are not necessary. You need to keep stock of your finances to be able to budget appropriately.
Listing down expenses may be taxing, but it’s the budgeting that’s quite hard. And when you do the budgeting, always prioritize debt payment. Allocating a budget is necessarily the most essential step in how to pay off debt.
Don’t skip on payment
Your loan will only get bigger if you skip payments. If you skip just a month of debt payment, you will incur interest and sometimes penalty. So you will be worse off than you originally were and you don’t even have that much of an income to make a smooth recovery.
Now that you have your list of expenses and a budget study and assess these two documents. Evaluate which expenditure you can trim down. This way, you can add the shaved off expenses to your debt payment. The sooner you pay off your debt, the easier you can breathe.
According to a report, one-third of American households spend more than 30% of their income on housing expenses. A lot of them actually spend as much as 50% on housing expenses. Generally, it is recommended that 30% of the income will go to housing—anything more than that will already be a burden. So if you stick to just 30% of your income for your housing, then the excess could go to debt servicing.
Cut down food expenses
Armed with your list of expenses, you might realize how pathetic your food expense is. Food is generally among the items Americans really splurge on. But if you really want to be debt-free as soon as you can, then perhaps you can cut down your steak-eating habit to just once a month rather than once a week. If we don’t earn a lot, we have to make some sacrifices if we want to learn how to pay off debt quickly. Besides, you are not going to starve if you miss eating on a couple of steaks in a month.