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How To Pay Off Debt With No Money


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It’s a classic trap: You’re deep in debt, but you do not have the money to pay off your obligations. So, over time, you sink ever more deeply into the red and lose hope of turning things around. 

However, this depressing reality — shared by millions of people across the U.S. — does not have to be your fate. Even if your income is low and your savings are scant, you can still climb out of the deep hole of debt and move to higher ground. 

Wondering how to get out of debt on a low income? Following are some tips.  

Create a budget 

As with any obstacle, the first step to conquering your problem is to admit it exists. If you are deep in debt, chances are good that you are doing something that doesn’t work and needs to be fixed.  

Building a budget is a great way to control your spending. Before you set a budget, it might help to track your spending penny by penny for a month or two so you can get a clearer picture of where your money goes. 

Once you understand these patterns, you can identify which expenditures are unnecessary and can be eliminated.  

Start cutting expenses

A good budget will likely require you to rein in your monthly expenditures. That means you need to cut your spending somewhere.  

This can be the most painful part of getting out of debt. If you love a daily bagel or weekly meal at an expensive restaurant, it can be tough to give up these things. Or maybe you get pleasure from shopping at the mall or gathering with friends at your favorite watering hole.  

However, the cold, hard truth is that these are luxuries, not necessities. If you are serious about clearing your debt, you will need to give them up, or at least dramatically cut back on them. The more expenses you trim from your budget, the quicker you will achieve a debt-free life.   

Look for new sources of income 

The vast majority of people can find expenses to eliminate from their budget. That is true even if your income is low.  

However, some people find that they still are not saving enough to truly make a dent in their debts. When this is the case, look for ways to generate new sources of income that can help you eliminate debt.  

For some people, this might be a part-time job during evenings or weekends. For others, it will be a side hustle, such as driving for Uber, selling items on eBay or Etsy, or even renting out part of their home.  

Yes, it is extra work to do these things. But agreeing to do so can dramatically speed up the process of paying off debt.  

Pay down your old debt 

As you trim expenses out of your budget and find new sources of income, it will generate a lot of new money that you can use to pay down old debts. This is the heart of your plan to get out of debt.  

Use as much of this money as possible to pay down debts week by week, month by month. There are two primary methods of paying down debt:  

  • The “snowball” method. You completely pay off your smallest debt before moving on to the next-smallest debt. The goal is to create momentum by paying off a debt completely and quickly, so that you are motivated to tackle the next debt.   
  • The “avalanche” method. You start with the debt with the highest interest rate, even if it is large and will take a long time to pay off. When you finally pay off the debt, you move to the debt with the next-highest interest rate.  

The snowball method feels the best, and might keep you motivated because you will see the debts fall quickly, one by one.  

The avalanche method requires more patience because it might take more time to pay off those larger debts completely. Some people find this frustrating, but the avalanche method usually will save you more money — because you pay off debts with higher interest rates first — compared to using the snowball method.  

Choose the method that works best for you.  

Stop adding new debt 

As your pile of debt begins to shrink, you will likely feel enormous relief — and maybe even a little pride. It can be tempting to celebrate this newfound frugality by rewarding yourself with a splurge.  

In itself, this is not a terrible thing. A modest reward is appropriate after all your hard work. But be careful to avoid falling into old patterns that will push you back into the red.  

No matter how much debt you pay down, it will all be for naught if you continue to pile up new debts.  

Look for help if you need it 

Some people can tackle their debt problem without outside help. However, others struggle to overcome the bad habits that put them into debt in the first place.  

There is no shame in finding yourself in the latter camp. If your best efforts fail to tame the debt problem, it might be time to seek outside help.  

Nonprofit credit-counseling agencies can be a great resource. In many cases, they offer free assistance and can help you craft a budget or consolidate your debts. Or, you may prefer using a debt relief service to negotiate debts with your creditors.  

Whichever approach you settle on, the time to start tackling your debts is now, regardless of how low your income is.  

Wondering how to get out of debt? The truth is that in the short term, eliminating debt involves sacrifice and a lot of hard work.  

But over the long haul, you will gain a newfound freedom that will make that time of toil feel worth it.  

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