Here are the 5 steps you should follow to start your journey to get out of debt.
Boosting your credit score, future earnings, and your financial security are some of the top reasons to become debt free. If you earn a low income, you may think achieving financial freedom is next to impossible, but that’s far from the truth.
You might be asking yourself how to get out of debt on a low income. The answer isn’t simple and will require adjustments in your day to day routine. Yet, you can do it if you put your mind to it and develop a plan.
Don’t know where to start? We’ve got you covered. Here are the 5 steps you should follow to start your journey to get out of debt.
Take a Look at Your Financial Situation
The first step to get out of debt is taking a look at your financial situation. How much do you owe? What are the interest rates on your accounts?
These questions can help you obtain insight into your debt. It’s important to crunch your numbers and write down all your accounts. You should also consider your current expenses to get a complete picture of your financial situation.
Write a Budget
Most consumers don’t budget their everyday expenses and debt payments. To get out of debt, it’s vital to learn how much money is going in and out. Here are some examples of items to include in your budget:
- Rent/Mortgage Payment
- Minimum Loan Payments
- Child Care
- Cost of Transportation
Keep in mind you should adjust this list to your lifestyle. If you don’t have children, you won’t need to worry about adding child care and other related expenses to your budget. Make sure to include other expenses such as your gym or other monthly memberships.
Get Rid of Unnecessary Expenses
After creating your budget, it’s time to trim any unnecessary expenses. Do you need that monthly gym membership or box subscription?
Maybe you can do your own car detailing instead of taking it to the car wash. Remember every penny counts, most of all when you earn a low income.
Organize Your Accounts and Start Paying Them Off
If you keep making the minimum payments on your accounts, it will take you a long time to become debt-free. While it may be difficult at first, you should start making larger payments to pay off your accounts sooner.
It’s recommended to organize your accounts in a repayment order. Consider repaying your smaller or high-interest accounts first.
Keep Making Adjustments Until You Become Debt Free
After repaying an account, you should move on to the next one on your list and keep making adjustments to your budget.
In some cases, it’s difficult for debtors to get out of debt on their own. If this sounds familiar, you may consider consulting an accredited debt relief company. Their representatives can help you take control of your finances and repay your debt sooner rather than later.
So You Learned How to Get Out of Debt on a Low Income, Now What?
Learning how to get out of debt on a low income is the first step to milestones such as owning your first home, saving for retirement, among other financial goals.
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