Getting out of debt isn’t easy, and it can be even more difficult if you find yourself without much money to spare.
Even if you are living on an extremely tight budget, you can still pay off your debt.
Because, truthfully, no matter how much spare money you have, it is going to take some significant financial changes to become debt free.
I am here to tell you first hand that you can still pay off your debt even when you’re broke. Let me show you how!
Know The Difference Between Broke And Overspent
Before you tell yourself you don’t have any money to spare, look at your spending habits.
Are you “broke” after you’ve covered all your important necessary expenses (rent/mortgage, electric, food, phone etc) or are you “broke” after you’ve spent all your money on nonessentials (like going out to dinner or to the movies, or a few lunch dates with a girlfriends)?
If the first option sounds like you, then you can don’t want to make your situation worse by spending money on things you don’t need.
If the second sounds more like you, then you may need to make some changes to your spending habits to make extra room in your budget for debt payments.
Look at your expenses and see if there are any nonessential items in your budget. Cutting these expenses now could lead you to a debt-free future sooner than you expect!
Stop Adding To Your Debt
Tough Love Warning: Stop applying for loans and cut up those credit cards right now!
You won’t be able to get out of debt if all you are doing is adding to it.
It can be tough to live without a credit card, especially when funds are tight, but spending more money that you don’t have isn’t going to fix your situation.
If you are serious about getting out of debt, the first step is to find a way to live with the income you are currently making (as hard as that will be).
We put all our credit cards in the blender… and pulverized them so we couldn’t use them any longer.
Obviously in this day and age of digital ease, you don’t actually need the physical card to charge something (thank you Amazon for “remembering” my payment method for later), that means it has to be intentional to stop using them. Do something that will help you remember that you are not going to use them again.
Identify Wants vs Needs
Everyone has something they can trim from their budget, even if it’s painful.
Look at your spending and ask yourself if each purchase you made was a want or need.
If you are tight on money, and you find your purchases are full of desires (that new cell phone case was pretty… but did you truly NEED it?), you need to make some adjustments.
Keep in mind that these cuts are not for the sake of extra pocket money.
You are making changes to get out of debt.
Once you are out of debt, then you’ll have the freedom to make fun purchases for all your desires! And, even better, you won’t have any guilt!
Here are four ways we reduced our normal monthly expenses to free up cash to use towards debt:
Once you are debt free, you can add some of these “luxury” expenses back into your budget, if you haven’t decided you can live without them.
Ask For A Lower Interest Rate
This may not work with all of your creditors, but it can’t hurt to ask.
High-interest rates can make paying off your debt more difficult, as the majority of your monthly payment will go toward the interest and not your overall debt.
Having a good credit score, and a positive payment history can help give you the leverage you need to ask for a lower interest rate. Learn How Debt Affects Your Credit Score.
If your credit card company doesn’t budge on the interest rate, consider looking into a credit transfer to get a lower interest rate.
Avoid Late Fees At All Costs
Late payments and fees will slow down the progress you make toward becoming debt free.
Late fees are only delaying the inevitable. You’ll be forced to double up on payments, find the extra money for the fees, and you’ll end up paying even more on your debt.
Some late payments may even trigger a penalty rate which will make your debt stick around even longer.
If you have to rush to list something on sale on Facebook just to make that minimum payment… DO IT! Avoid the late fees at all costs so you don’t further compound the problem!
Direct Your Money
Each month as you are spending money, if you haven’t identified how you WANT to spend your money, which means creating a budget, then you are aiming for a target you don’t want to hit. You are aiming at NOTHING. You don’t have any goals for your money and you are setting yourself up for defeat!
A budget is crucial if you are paying off debt. This will tell you how much money you have to work with and give your money a place to go.
Don’t try to run numbers in your head, write it down on paper. Seeing those numbers written out will give you a better idea of your financial situation and may even help you make better spending decisions.
Use these posts to get you started so you get all set up quickly and easily:
Just because you are in debt and broke, doesn’t mean your situation is hopeless! These tips will not only help get you on the right track, but they’ll lead you to the debt-free life you’ve been dreaming of.
What other question do you have about getting out of debt? Comment below and I’ll get right back to you!
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