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. Today I’m going to go over strategies
you can use to pull off this major feat.
Take stock of your financial situation. You can’t fix the debt that you don’t acknowledge you have, because one ofthe 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.
After that, you can make a budget using zero-sum budgeting techniques. 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.
Look at your biggest expenses and see where you can trim fat. 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