pay off debt

How To Pay Off Debt Fast With Low Income

Nobody likes the feeling of owing money. Having to pay off debt is something a lot of us face but few are properly prepared to tackle.

These feelings can be further exacerbated by high-interest rates, loan service fees, and recurring monthly payments.

All these fees on top of your normal debt repayments can make paying off debt almost inconceivable.

Especially if you don’t have a lot of money, to begin with.

So how can you possibly get rid of your debt once and for all with a low income?

Here’s some helpful advice.

Create An Emergency Fund

There’s always another bill to pay, therefore, it counts to be prepared.

While you may be eager to start paying off your debt immediately, it is super important first to save a bit of cash as a buffer.

Without a financial fund or emergency buffer, any type of unexpected or unplanned expense can seriously through your debt repayment process off the rails.

And not to mention having to quickly find money will place you under a lot of stress.

The best angle to tackle an emergency fund is to open yourself a separate savings account. In doing so you are removing any temptation to spend your savings on any day-to-day purchases. 

An emergency fund doesn’t have to be any huge amount of money. Even $500-$1,000 will go a long way to covering any unforeseen costs that you may unexpectedly have to pay in a short period of time.

Determine Your Minimum Monthly Budget

Just because you can afford it, doesn’t mean you need it.

Developing a minimum monthly budget will go a long way to highlighting any unnecessary expenses you may have. While at the same time, bringing to light any areas of your budget that are necessary to meeting your basic living needs.

So where should you start?

First, determine the cost of your everyday living expenses. The bare-bones of how much money you require to live. Expenses such as rent, utilities, groceries, car costs, and debt-repayment. 

And second, as your budget starts to take shape, make note of any areas where you can tighten up and reduce your cost of living. 

For instance, if you happen to live somewhere with a spare bedroom, why not consider renting it out in order to earn a bit of extra cash on the side?

Or maybe it is possible to tighten up your grocery costs? Maybe try to limit your comfort and packaged foods and make more meals from scratch so as to save more money?

Perhaps you could review any subscriptions you may have. It’s far too easy to forget how much money is coming out of your account when you aren’t keeping track. Do you really need 3 or 4 paid streaming platforms? Is it a must to have your packages delivered overnight with an Amazon Prime subscription?

Remember reducing these costs can really go a long way to tightening your budget and saving money to paying off your debt faster.

To help you get started it is a great idea to employ the help of a budgeting app. This will ensure that you aren’t missing any easily remedied money leakages.

Another tip is to develop a detailed expenses spreadsheet or document. This will allow you to keep track of all your expenses while giving you a detailed perspective on how your new budgeting strategies are working out.

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Loan Refinancing Is Your Friend

Stop paying overpriced interest rates and loan fees, refinancing can save you some serious cash.

When aiming to save money and pay off debt another good place to look is your overall repayment costs. 

Banks and loan providers love sneaking in fees you aren’t necessarily aware of. Or, perhaps you signed up for a variable interest rate loan and are finding your repayments are slowly creeping higher and higher.

Well now is the time for you to consider your refinancing options. 

Refinancing refers to the process of one company buying out your debt from another. You’ll then, of course, owe money to the company that has taken on your loan. Preferably at a cheaper rate than what your original arrangments were with the previous company.

The benefit of refinancing is banks and loan providers are often willing to offer you very competitive interest rates. They do this in the hope that they will encourage you to make the switch to their services. 

This is great for you as you won’t be paying back as much money over the time of your loan.

But, be careful. Thorough research is a must when refinancing. Sometimes it’s not as simple as low-interest rates, be sure to check out any other ongoing fees that may apply to your refinanced loan.

Increasing Your Income Can Go A Long Way

Don’t depend on a single source of income, instead, make investments into creating a second source.

Reducing your living costs and minimizing any unnecessary spending is a great start to sourcing more money to pay your debt off faster. However, there is only so much you can reduce before you start to eat into the money you require to live.

Therefore, to really maximize your debt repayment efforts it’s ideal if you can find a second source of income to further boost your debt repayment abilities.

That may mean finding a higher paying job, upskilling to increase your wage in your current job, or finding yourself a side hustle.

There is a magnitude of ways you can achieve this. 

Perhaps you could start freelancing and cash in on the gig economy, maybe you could try picking up a second part-time or seasonal job, or possibly investing your money in a secure source of income return.

Whatever it may be, even a small amount of extra cash can really make a big difference when it comes to pay off debt faster.

Conclusion

However you go about paying off your loan, remember even if it is a small amount of money, it can go a long way.

And is there anything else you can do?

Well, you can employ the help of a budgeting app like Emma to start saving money toward debt repayment.

Emma is a money management app that will help you keep on top of your monthly budget. She will help you take control of your finances, keep your unnecessary purchases in check, and highlight any of those sneaky banking fees and forgotten subscriptions you may not have been aware of.

Emma is available for download on both the App Store and Google Play Store.

Edouard Daunizeau

I look after all things Growth here at Emma. I come from France and have spent the last few years scaling consumer tech startups in the UK and beyond. 🚀