Getting out of debt is challenging enough when you have plenty of money coming in, not to talk of when you are on a low income. While it is challenging, it is also not impossible. We will be sharing with you a few tips on how to manage and get out of debts, no matter how much you earn.
1. Make a list
The first step to managing and paying off your debt is to know exactly how much you owe and whom you owe. List the amount, interest, monthly payments, etc. Having all the debts in front of you allows you to see the bigger picture. Second, make a list of all your other monthly expenses – food, utilities, etc. Third, make a list of all the money you have coming in. These three lists will give you a clear picture of where you stand financially
2. Decide which debts to pay off first
From your debt list, prioritize and rank them in the order you want to pay them. It is advisable you pay the debt with the lowest balance first. Completely paying off a debt gives you extra motivation to pay others
3. Trim unnecessary spending
Once you have a clear picture of your expenses, block all unnecessary spending. You cannot get out of debt if your debt keeps growing. Buying food in bulk, cooking your own food, cutting unnecessary subscriptions, buying used clothing are some ways you cut expenses.
4. Use an emergency fund to fall back on
Without access to savings, you would have to go into debt to cover an emergency expense. Having an emergency fund will go a long way in covering little expenses that come your way. An emergency fund should be able to cover up to 3 – 6 months of living expenses
5. Contact your creditors
Your creditors are human too and may just possess a sense of empathy. If you find yourself struggling with repaying your debts, you should contact them to secure an extension
6. Get help
If paying your debts on your own seems difficult, don’t be ashamed to ask for help. You want to pay off your debt, and that’s the most important thing
7. Find ways to make extra income
Increasing your sources of income is an excellent way to pay off your debts. More money means more leverage. If you can, get a part-time job, start a business, sell off some of your stuff. When you start making extra income, every kobo must go into paying off your debts.
In conclusion, being in debt is always overwhelming, especially when you are earning a small income. However, if you diligently and persistently apply those rules, you can better manage your debts and work your way to financial freedom.