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Is it your goal to get out of debt, but you only work a minimum wage job? Well, getting out of debt is hard enough when you have plenty of money coming in, let alone facing this challenge when you’re on a low income.

But here’s the thing: it is possible to get out of debt on a low income. But wait: there’s more! It’s also possible to do it without selling major assets like the house or car you don’t yet have.

So how can you successfully achieve your goal of paying off your debt with minimum wage? This article contain practical steps and suggestions that can help you.

  • How to Get Out of Debt Working a Minimum Wage Job
  • Steps to getting out of debt
  • How to Create a Budget And Get Out of Debt
  • How to Get Out of Debt Fast
  • How to Get Out of Debt With Bad Credit

How to Get Out of Debt Working a Minimum Wage Job

Identify Your Financial Situation

You can’t fix the debt that you don’t acknowledge you have, because one of the most important elements of any debt-reduction strategy is choosing which debt to tackle first. Sit down at a computer—or with an old-school paper spreadsheet if that’s your style—and write down all of your debts.

As you’re working, make sure you list the amount, the interest, the term, your monthly payments, and the available credit limit for each debt. This will help you understand the full breadth of the situation, and give you solid numbers to work with when you create a budget.

And while you’re at it, make separate spreadsheets to list all of your other monthly expenses—things like food, utilities, car payments, etc.—plus one for all the money that you have coming in from various sources.

Make a Budget Using Zero Sum Budgeting Technique

Nobody likes making a budget. But trust me: this is the only way you’ll manage to get your debt under control.

Once you know all your expenses and debts, you can go through the process of allocating your monthly income as necessary. Holly Johnson is a personal finance blogger, and she once found herself buried under a mountain of debt. She used zero-sum budgeting to get out.

“Zero-sum budgeting gives you the tools to improve your finances by teaching you how to a) live off last month’s actual income instead of income projections, b) make actionable decisions regarding your money, and c) reduce waste,” she explains.

The idea behind zero-sum budgeting is that at the end of the month, you don’t have a single cent left over because every dollar has been allocated to bills, debts, and savings. This may sound a little unsettling, but it will help you regain control much faster.

When you create your budget, the first things to take care of are savings and debts. Then you can use what’s left over for everything else. If you have to cut expenses somewhere, it comes from things like entertainment and transportation rather than debt-reduction or investments.

Cut Down on Your Biggest Expenses

Once you know where you’re at regarding your debts, expenses, and budget, you must take steps to close the purse strings. You can’t get out of debt if your debt keeps growing. Because you can’t take that money from debt payments or savings, it’ll have to come from elsewhere.

Go over your budget and categorize your spending to see where you’re spending too much money—on transportation or eating out, for instance. Then make an expenditure reduction plan. Here are some ideas:

  • Buy food in bulk, especially when it’s on sale
  • Clip coupons for everything that you buy, from food to clothes to toiletries and more
  • Sell your car (if you have one) and walk or bike to work—if you’re like most people, you spend an average of $9,000 a year on your car
  • Cook more at home and eat out less
  • Cut your subscriptions for things like cable and the gym, and opt for lower service packages for necessary things like cell phones and internet
  • Bring your daily coffee from home rather than buying out
  • Always buy used: check thrift stores and classifieds when you need to buy anything, including clothes, furniture, vehicles, and even appliances
Earn More Than Your Minimum Debt Payment

We’ve talked about budgets and spending and how to stop adding to your debts, but now it’s time to get to the nitty gritty details of debt reduction. The first and among the most important things to realize is this: Making just the minimum payment will result in life-long debt.

The average American has a credit card balance of about $9,600 with a 15 percent interest rate. Making the minimum payment each month would leave you paying off that debt for nearly 12 years! If you want to get out of debt, you must make higher-than- minimum payments.

Tackle One Balance at a Time

Now I know it may not be possible for you to make above-minimum payments on every debt every month. And don’t worry—you don’t have to. But what you do have to do is choose one debt to pay down first. While you’re doing that, continue making minimum payments elsewhere.

For instance, say you have five debts with different balances. To make things easy, we’ll say the minimum on each is $100. You’d start by making the minimum on four of those debts, but pay, say, $200 (for a total of $600) each month toward one of the debts until it was paid off.

As soon as you take care of that first balance, you can do a happy dance and start to tackle the next debt. From there, pay the minimum each month on the remaining three, and pay $300 (so you’re still paying the same $600 amount) toward the singled-out debt.

The Harvard Business Review investigated different debt reduction approaches and found that this method can help you pay off debts up to 15 percent faster than if you just spread the $600 evenly among all the debts.

Stay in touch with your creditors throughout the process

Believe it or not, creditors are people too, and they do have a sense of sympathy. If you find yourself in a situation where you’re in over your head or struggling, get on the phone and talk to your creditors.

According to Bruce McClary, “don’t wait until an account is about to be closed because you’ve had several months of late or missed payments. Tell the creditor you’d like to pay down your balance faster and want to know what services are available to help you manage your debt.”

The creditor may be able to reduce or eliminate your interest payments, at least temporarily. This is especially true if you’ve fallen on financial hardship recently, because of things like a job loss or medical emergency.

Switching to cash will help you reduce your spending

No matter which method you choose, cutting up your credit cards may help you to stay on track as you hack away at your debts.

On average, people spend about 15 percent more on purchases when they use plastic.

Find an additional source of income to help you pay debts faster

An excellent way of dealing with debts is to increase the money you have to pay them off. This isn’t always a feasible option, but there are ways you can increase your income. Here are a few ideas to get the ball rolling:

  • Get a part-time job
  • Work more overtime
  • Sell some of your things
  • Rent out part of your house
  • Set your sights on and work toward getting a promotion

When you start to make a little extra income, every extra dollar must go toward your debts. That includes unexpected income like gifts, tax returns, bonuses, prizes, or any other money you come into

Consider a balance transfer in some scenarios

A balance transfer can be a risky way to deal with debt, but there are some situations where it makes sound financial sense. One condition is that the offer must include a zero percent interest rate for a fixed period of time. This could save you tons of interest.

Another condition is that the balance transfer fee is small, or ideally nil. Another caveat is that the interest rate after the introductory period must not be exorbitant.

But be aware that this method will work best if you have the means to pay down a substantial amount of the debt during the zero-interest period.

Finally, know what debt solutions to avoid

Being in debt is terrifying. It’s panic-inducing. It can make you question your goals and dreams for the future. Worst of all, it can inspire people to listen to the wrong people or make horrible choices.

There are many debt-reduction solutions out there available to people, but not all of them are created equal. Credit counseling is one such option because while it may seem like a perfect idea, having creditors reduce your debt can severely damage your credit score for many years.

Similarly, an option like debt consolidation, which takes all of your debts and rolls them into a single debt, seems great but can have terrible consequences, especially if you don’t address the root causes of the debt.

Steps to getting out of debt

1. Use a balance transfer credit card

If you are on a low income and you are trying to get out of debt, an excellent option is to get a balance transfer credit card. Here’s what happens: you move the balance of one credit card to a second new credit card, and this way you effectively pay off the outstanding balance.

And balance transfer credit cards have a huge benefit: they almost always in my experience come with a special type of promotion as an incentive for the bank to get your business. And during this period, you do not pay any interest rate at all and it’s an opportunity for you to save money on all that interest you would otherwise be paying on the lump sum you owe.

Discover it® Balance Transfer

The Discover it® Balance Transfer is by far a superb credit card for doing balance transfers, especially if you have good to excellent credit. Here’s what you’ll want to know: the card has an amazing See Terms See Terms introductory period on balance transfers. And then once the introductory period ends, the regular APR is See Terms.

Chase Freedom®

Another option for you to consider is the Chase Freedom® card if you have good to excellent credit. Here’s why: there’s 0% Intro APR on Purchases for 15 months and 0% Intro APR on Balance Transfers for 15 months. 

There’s also a cool 5% cash back on up to $1,500 in purchases in bonus categories each quarter when you activate. balance transfers. There’s no annual fee plus you get a $150 bonus when you spend $500 with the credit card within the first three months of opening the account.

Discover it® Secured

If you have not-so-good credit, and or you’re new in the credit world, a great to consider is Discover it® Secured – which as a secured card, you have to make a payment of a refundable security deposit before the account can be opened.

So while on the one hand, it may not be completely logical to transfer a balance to the Discover it® Secured card, you will be having the opportunity to build credit so that is a win for this particular card. This card lets you build your credit first, to then next find a good balance transfer offer.

A nice benefit for the card is the 2% cash back at restaurants or gas stations on up to $1,000 in combined purchases each quarter, and one percent cash back on all other credit card purchases. Discover will even match the amount you’ve earned during your account’s first year.

2. Take a debt consolidation loan

Debt consolidation is ideal for smaller or moderate amounts of debt you may have that you are sure is going to take you more than 6 months to pay off.

Unfortunately, the tricky part of debt consolidation loans is that there’s no magic solution for making your debt disappear. There’s no magic wand!

The best news will be if you have a high credit score, and if you do, you can pretty easily get some pretty attractive rates. But if that’s not the case, and your credit score is lower, you will need to be super careful about diligently checking and comparing, and then comparing again interest rates.

The bottom line to remember: with debt consolidation loans, you have to religiously make your monthly payments each month and stay 100% committed to making some serious steps in being sure to live within your means.

How to Create a Budget And Get Out of Debt

Many people plan to shed the extra pounds that are dragging them down – but does that include weight from your bad debt? It’s amazing how heavy a maxed out credit card can feel! If you want to shed your debt weight, get out of debt and improve your financial health, here are some tips below.

  1. Take stock of your obligations: list how much you owe and how much interest you are paying. Seeing it all in black and white can be strangely motivating.
  2. Prioritize your debts: mortgage and vehicle payments are typically at the top of the list.
  3. Track where you are currently spending your money. Before you can make any changes, you need to identify what you can change.
  4. Create a budget. Without a personal budget (spending plan), it is impossible to live within your means.
  5. Develop a realistic debt reduction plan; consider:
  • where you can trim expenses
  • if you can generate some extra income
  • if you should suspend regular investment contributions while you’re paying down debt
  • if you can consolidate your debt at a lower interest rate, without incurring more debt
  • if you need assistance to consider your options and develop a plan that will work

Over the long term, debt will drag you down. The interest and fees you pay will only grow. The more you spend to service your debt, the less money you have available for what’s important to you. Dropping your bad debt weight sooner than later is easier than dragging it around with you!

Try these small changes to stay out of debt:

  • Use only cash, no plastic of any kind, for all of your purchases for one week.
  • Prove to yourself that you can live without your credit card and put it away for two weeks.
  • Plan not to eat out for one week – prepare to do that by shopping for foods that you can take along for lunch; create a meal plan for dinners; no take-out on the way home either.
  • Don’t buy any drinks-to-go for two weeks – no coffees, teas, waters, juices, pop.
  • Scale back your cell phone features for one month and only use your phone for essential calls.
  • Reduce the monthly fee on one utility bundle, e.g. lower your cable package, for two months.

How to Get Out of Debt Fast

No matter what kind of debt you’re in, paying it off can take years — or even decades — to get out of debt.

Fortunately, some strategies exist that can make paying off debt faster — and a whole lot less painful. If you’re ready to get out of debt, consider these tried-and-true methods:

1. Pay more than the minimum payment

If you carry the average credit card balance of $15,609, pay a typical 15% APR, and make the minimum monthly payment of $625, it will take you 13.5 years to pay it off. And that’s only if you don’t add to the balance in the meantime, which can be a challenge on its own.

Whether you’re carrying credit card debt, personal loans, or student loans, one of the best ways to pay them down sooner is to make more than the minimum monthly payment.

Doing so will not only help you save on interest throughout the life of your loan, but it will also speed up the payoff process. To avoid any headaches, make sure your loan doesn’t charge any prepayment penalties before you get started.

If you need a nudge in this direction, you can enlist the help of some free online and mobile debt repayment tools, too, like Tally, Unbury.Me, or ReadyForZero, all of which can help you chart and track your progress as you pay down balances.

2. Try the debt snowball method

If you’re in the mood to pay more than the minimum monthly payments on your credit cards and other debts, consider using the debt snowball method to speed up the process even more and build momentum.

As a first step, you’ll want to list all of the debts you owe from smallest to largest. Throw all of your excess funds at the smallest balance, while making the minimum payments on all your larger loans. Once the smallest balance is paid off, start putting that extra money toward the next smallest debt until you pay that one off, and so on.

Over time, your small balances should disappear one by one, freeing up more dollars to throw at your larger debts and loans. This “snowball effect” allows you to pay down smaller balances first — logging a few “wins” for the psychological effect — while letting you save the largest loans for last. Ultimately, the goal is snowballing all of your extra dollars toward your debts until they’re demolished — and you’re finally debt-free.

3. Pick up a side hustle

Attacking your debts with the debt snowball method will speed up the process, but earning more money can amplify your efforts even further. Nearly everyone has a talent or skill they can monetize, whether it’s babysitting, mowing yards, cleaning houses, or becoming a virtual assistant.

With sites like TaskRabbit and Upwork.com, nearly anyone can find some way to earn extra money on the side. The key is taking any extra money you earn and using it to pay off loans right away.

4. Get a seasonal, part-time job

With the holidays coming up, local retailers are on the lookout for flexible, seasonal workers who can keep their stores operational during the busy, festive season. If you’re willing and able, you could pick up one of these part-time jobs and earn some extra cash to use toward your debts.

Even outside of the holidays, plenty of seasonal jobs may be available. Springtime brings the need for seasonal greenhouse workers and farm jobs, while summer calls for tour operators and all types of outdoor, temporary workers from lifeguards to landscapers. Fall brings seasonal work for haunted house attractions, pumpkin patches, and fall harvest.

The bottom line: No matter what season it is, a temporary job without a long-term commitment could be within reach.

5. Sell everything you don’t need

If you live in a neighborhood that permits it, a good old-fashioned garage sale is normally the cheapest and easiest way to unload your unwanted belongings for a profit. Otherwise, you can consider selling your items through a consignment shop, one of the many online resellers out there, or a Facebook yard sale group.

If you’re looking for a way to make some cash quickly, it might pay to take stock of your belongings first. Most of us have stuff lying around that we rarely use and could live without if we really needed to. Why not sell your extra stuff and use the funds to pay down your debts?

6. Ask for lower interest rates on your credit cards — and negotiate other bills

If your credit card interest rates are so high it feels almost impossible to make headway on your balances, it’s worth calling your card issuer to negotiate.

Believe it or not, asking for lower interest rates is actually quite commonplace. And if you have a solid history of paying your bills on time, there’s a good possibility of getting a lower interest rate.

Beyond credit card interest, several other types of bills can usually be negotiated down or eliminated as well. Always remember, the worst anyone can say is no. And the less you pay for your fixed expenses, the more money you can throw at your debts.

If you’re not the negotiating type, a service like TrueBill can help. The app will review your purchase history to find forgotten subscriptions and other repeating fees you might want to cut from your budget, and it can even negotiate some bills down for you.

7. Drop expensive habits

If you’re in debt and consistently coming up short each month, evaluating your habits might be the best idea yet. No matter what, it makes sense to look at the small ways you’re spending money daily. That way, you can evaluate whether those purchases are worth it — and come up with ways to minimize them or get rid of them.

If your expensive habit is smoking or drinking, that’s an easy one — quit. Alcohol and tobacco do nothing for you except stand between you and your long-term goals.

If your expensive habit is slightly less incendiary – like a daily latte, restaurant lunches during work hours, or fast food — the best plan of attack is usually cutting way down with the goal of eliminating these behaviors or replacing them with something less expensive.

8. Use ‘found money’ to pay off balances

Most people come across some type of “found money” throughout the year. Maybe you get an annual raise, an inheritance, or bonus at work. Or maybe you count on a big, fat tax refund every spring. Whatever type of “found money” it is, it could go a long way toward helping you become debt-free.

Each time you come across any unusual sources of income, you can use those dollars to pay off a big chunk of debt. If you’re doing the debt snowball method, use the money to pay down your smallest balance. And if you’re left with only big balances, you can use those dollars to take a huge chunk out of whatever’s left.

How to Get Out of Debt With Bad Credit

Rebuilding a credit score may take months or years. Currently, there are no recommended “get out of debt in a day” hotlines to call for help. However, there are always steps you can take to get out of debt no matter how bad your credit score is.

Here are a few options to consider.

Debt settlement

A debt settlement lets you settle your debt for less than what you owe. You can hire a company, or lawyer to negotiate with the lender, or you can do it yourself.

Some debt settlement companies claim they can settle your debt for 50% less than what you owed, but, of course, they’ll want their cut, too. They’ll usually charge 20%-25% of the amount saved.

Clearly, there are a few drawbacks to debt settlement, otherwise, why pay debts in full in the first place?

First off, it can take two to three years to settle the debt. Debt settlement companies will tell you to stop making payments on credit cards while they negotiate, but that doesn’t stop interest and late fees from piling up.

Also, lenders and collection agencies are not required to accept your offer. If they do accept your offer, they’ll report back to the credit bureaus and you’ll have a negative mark on your credit report for seven years.

Let’s not forget about Uncle Sam, either. The IRS counts forgiven debt as income. So, if you settle a 20,000 debt for 10,000, you’ll still owe the IRS taxes for that $10,000 you got out of paying.

Debt consolidation

A debt consolidation loan is a loan you use to pay off debts. It lets you streamline multiple debts into one convenient monthly payment. If you can get a debt consolidation loan at a lower interest rate than what you’re paying on high-interest debt like credit cards , you will save a lot of money.

If you have good credit, you can get a debt consolidation loan at around 7% APR, but if you’ve read this far, your credit probably ranges in the “fair” to “not-so-fair” range, which means paying interest rates in the 15%-20% range.

The lower your credit score is, the less a debt consolidation loan will make sense for you as a way out of the hole. Lenders will either be unwilling to give you yet another loan, or they’ll offer you one with crippling interest rates attached.

If the interest rates are so high that they rival or exceed the rates of your current debt than it’s time to look at another option than a bad credit debt consolidation loan.

Debt management programs

Most options for getting out of debt seem to cater to people with good credit or little debt. Debt management programs offer an avenue for people with really bad debt and not-so-good credit. They are a good place to turn when your financial situation has become either dire or so convoluted, you’re unsure of the next best step.

A debt management program can provide credit card consolidation without the loan. You make one monthly payment to the debt management agency and they, in turn, repay your creditors.

An agent can negotiate new terms with your lenders that should result in lower interest rates and possibly dropped fess. The agent can also go over your finances and point out ways to save that you may have missed or taken for granted.

At the very least, a debt management program will provide a level of order in what may otherwise be an uncomfortable and chaotic situation.

Home equity line of credit

If you own a home, you should look into a home equity line of credit or HELOC. A HELOC is a line of credit that matches up to 80% of the equity in your home.

Interest rates are lower for HELOCs than personal loans, since your home is being put up for collateral. The obvious downside here is if you default on the loan than the lender can foreclose on your home.

Lenders will also take your credit score and payment history into account when deciding on loan terms. So, it may be best to work on your credit for a few months before going forward with this one.

Bankruptcy

Filing for bankruptcy is never the advice people want to hear, but depending on your situation, it may be the wisest option.

It should, however, be your last option.

Don’t take filing for bankruptcy lightly. Your credit score after bankruptcy will plummet. Loans will be hard if not impossible to come by, and the stain of bankruptcy will remain on your credit report for seven to 10 years.

Even with these negative aspects considered, bankruptcy can give you a fresh start by allowing you to rebuild your financial portfolio. The whole point of bankruptcy is to give people a second (albeit hard-fought) chance, not to punish them.

Finally

Being in debt is always overwhelming, and especially when you’re trying to get out of it on a small income. But there is hope, it is possible to get out of debt.

The key to getting out of debt on a low income is making a strict and bare-bones budget, tackling one debt at a time diligently and persistently, and not giving up, no matter how hard it seems.

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