Living in debts can be very distressing. Sometimes making payments on time can be very hard. A debt always feels like a very huge debt hanging around someone’s neck and when there are already other obligations it can be too heavy. It is important to learn how to deal with your debts effectively. If you are living on debts and have a low income, you may be timidly hopeful of coming across an article addressing the subject ‘How to Be Debt Free on Low Income’, though deep down you feel it is better to be real. The idea of living out of debts is often intriguing, though making it real always appear impossible.
Is it possible to get out of debts completely even if you do not earn a lot of income? The simple answer is “yes”. However, it requires a lot of efforts. This is something that has disturbed many people with hefty incomes. But trust you me, it is possible and does not even need to dispose of a few of your valuables. In this blog, we are going to discuss three main strategies you can use to be debt free. Each of the three strategies will give you important tips that will essential in this fight. So, let us begin…
Come Up With A Plan
It has often been said that if you fail to plan, you are definitely planning to fail. Well, this is more sensible when it comes to financial matters. If you want to live a debt-free life, the basic step you need to take is to plan. The following four tips will prove helpful in this regard:
- Examine your problems. If you are already in debts, giving up is the last thing to ever think of. You need to analyze the amount you owe lenders and draft a plan that will help you get out of this problem. You have to be true to yourself and crunch some figures. Put together all your debts, have their total cost and confront it.
- Prioritize high-interest loans. After having details of your loans, you need to rank them basing the interest rates. It is always hard to repay debts because they often grow with time. If you do not settle high-interest loans quickly, you may pay too much in the end. Nevertheless, some people prefer starting to pay low-interest loans first in order to gain momentum. Figure out which option will serve you better, though it is highly recommended you start with high-interest loans. Once you finish one, go to the next one in the list with the same devotion.
- Draft a plan of paying the debts. Examine your finances and determine which strategy of making payments is best applicable to you. Start paying high-interest loans while making some small payment to the rest. This will make you feel active in total control of your debt. If the rates are similar, then settle the debt with the minimum balance first. This will give you more confidence and the drive to continue confronting your debts.
- Seek advice from a financial counselor. It may be easier for you to consider other options such as debt refinancing without you knowing. You don’t have to fight it all alone, seek help. Besides, it may be possible to have your interest rates reduced on some loans, or even get a referral for a while.
Repay The Debts
The next thing you need to do is to focus on settling debts. You cannot be debt-free miraculously without paying your debts. Use the following five tips to approach your debts:
- Draft a strict budget. It is important to live within your means and it is not hard, individuals make it hard. You need to create a realistic budget and follow it. Sum up all your basic monthly expenses, which include food, rent, transport cost if you commute to work, and other essential bills. Make sure you spend less than your monthly income. If you spend more than what you earn, you have to cut your expenses significantly. If this not possible, then look for an alternative way of supplementing your income.
- Reduce expenses where possible. Aim and cutting your expenses to the maximum possible. Reduce your costs as much as you can. There are so many things you can do in this regard. For instance, you can opt for money-saving meals. This means even avoiding eating in restaurants. Besides, you can also reduce the expenditure on entertainment.
- Consider paying your debts whenever you get extra cash. Instead of directing an extra earning you make on other unnecessary things, remember you have loan obligations and prioritize them.
- Maximize your savings. If you fail to spend on something, save the amount you would otherwise have used. Make saving your goals as well.
- If you benefit from the tax refund, wisely incur it. If you get some little cash on tax refund, devote it to debt payment.
Live Debt Free
You were aiming at living a debt free life. If you follow the tips discussed in the two-preceding section, you will get there. But the challenge will be remaining there. Well, use the following tips to remain debt free:
- Commit yourself to change in conduct. To stay debt free, you must avoid poor spending habits and buying things you cannot afford. It pays to strictly live within your means. It is a fact that if you cannot afford to pay for an item at the moment, you do not need it. But it does not mean being a miser. You can still spend on vacation and entertainment.
- Continue saving. Every time you receive your monthly income, set aside a portion for saving. Buy the things you can afford without getting into debts.
- Be proud of living just within your means. We often get into debts because of a false belief that we deserve a specific lifestyle or life quality. Be a happy person who lives within his abilities and continue saving for a better future.
- Live healthy always. Have a proper diet and exercise regularly. Medical debts can put you into a lot of financial problems. Do not hesitate to do anything you can afford to live a healthy life. It is important to get insured. So, look at some good health insurance and subscribe to it.
- Build good credit. If you are done with debt payments, it is time to build your credit score. You may check different sites for loan options including this one best money lender in Singapore
Since not all of us earn six figures, living a debt free life can be very hard. Nevertheless, it is not an issue of impossibility. We have discussed how you can effectively pay your loans and live debt free even if you earn a low income. It may not be easy but if you follow these tips you will be successful. We wish you the best.