It would be very helpful if you had a big wedge of cash stored away somewhere in order to pay off your debt. But it’s not necessary and even if you did have a big wedge of cash sitting somewhere, the chances are that it’s not earmarked for repaying debts! It doesn’t take a financial miracle either like winning the lottery or receiving some kind of inheritance to get rid of your debt.
You can pay off your debt even if you are on a low income providing you start thinking differently about money and really want to be free from debt. I can write this with confidence because my hubby and I are actually getting rid of debt now whilst earning around half the amount of income compared to a few years ago.
Our debt went from being an annoyance when it ate into our monthly budget, to being downright scary when we were facing bankruptcy. In the end, we had no choice but to enter into a debt management plan to try to cope with our debt repayments. After that happened, we made up our minds to do something about our debt once and for all. And then, we started to see real progress!
Here’s what you need to do if you’re serious about paying off your debt:
1. Start living below your means
Many people live beyond their means without even realising that they are doing so – it can happen very subtly. For example, you’re just going along with life, earning money, spending money, paying bills. And suddenly, the bills and spending money part of life gradually takes over and debt starts building up. In a nutshell, if you’re living beyond your means, you’re spending more than you earn.
Living below your means is one of the most important things you need to do if you want to free up money to pay off your debt. There are two main ways to do this:
- Reduce your expenditure.
- Earn more money.
Be ruthless with slashing your expenditure. Get rid of anything that you don’t need such as Sky TV; gym memberships; magazine subscriptions and the morning coffee on the way to work. All these small savings will start to add up and you’ll begin to see more spare cash in your bank account. Once you’ve exhausted all the easy ways to save in your monthly budget, look at more creative ways of saving money by shopping around for the cheapest suppliers, becoming energy efficient and growing your own vegetables. Learn to love being frugal!
There will come a point where you’ve squeezed your budget into oblivion. You’ll then need to look at ways to earn more money. Making more money will help you achieve debt freedom faster and help you build wealth quicker when the debts are gone. This probably won’t be easy, but it’s not impossible. Figure out what you’re good at and try to make money from your skills.
Here are just a few things you could try to raise your income:
- Apply for a promotion in your existing company or elsewhere.
- Ask for overtime at work if it’s on offer.
- Sell the things that you no longer need on eBay, Gumtree or Craigslist.
- Make your own handmade products (e.g. candles, cushion covers, jewellery, cards) and sell them.
- Apply for a second job in the evenings such as bar work, tutoring or working in your local supermarket.
- Look for side gigs based on your skills such as: freelance writing; proofreading; photography; catering; dog walking; pet sitting; babysitting; gardening services; cleaning and ironing – anything that you can do that other people need help with. Advertise your services on TaskRabbit, People Per Hour or Fiverr.
2. Set some goals
Once you’ve got your saving and making money hat on, set yourself goals for your debt repayment. Setting goals really helps because they will give you something to work towards. Each time you pay off another chunk of debt, you’ll be feeling great! Log your progress and keep tracking it. Keep reviewing your goals to make sure they are still realistic.
3. Get some serious willpower
No matter how much debt you owe whether it’s a ton of debt or just a little bit, at some point you’ll be feeling fed up with paying it off. Paying off debt involves making sacrifices, including not being able to just buy whatever you want and saying no to friends and family at times when you can’t afford to take part in certain social activities. (Note: setting aside a little money in your budget for socialising will help keep you sane.)
The road to paying off your debt will no doubt be bumpy. There will be times when you’ll just want to splurge and that’s fine. Splurging happens! The main point to remember is not to splurge too often and to get straight back on the wagon.
Try not to pay for things on credit and don’t go back to square one – always keep going forwards even if it means that you haven’t paid anything extra off your debt for a while. Keep motivated by reading about how other people have paid off their debt. It’ll remind you that you’re not alone and that debt is one challenge that can be overcome.
Will you do what it takes to pay off your debt?
Author Bio: As well as writing for Debt Advice Blog, Hayley also writes about how she’s getting out of debt over at her website: A Disease Called Debt.