Welcome to Q & A Wednesday on Millionaire Habits, where I answer one of your weekly questions for everyone’s benefit. Have a question?
💡 Question: “Steve, I’m about $23,000 in debt, but my income is so low that I can’t pay it off. Is there any way to eliminate debt on a shitty salary?”
First, congratulations.
You’ll never get out of debt if you don’t prioritize it. And it looks like you’re taking your debt seriously, which is a great first step.
You’re right; paying off debt without extra money is difficult. But thankfully, it’s not impossible.
Let’s take it one step at a time.
How To Murder Your Debt
First things first, you need to change your spending habits.
Eliminating debt is important. But what’s more important right now is not adding to your debt. That means stop spending on anything that isn’t absolutely critical.
I’m talking life-and-death expenses here. Cut that spending out if it isn’t necessary to keep you alive.
Things like restaurants, concert or sports tickets, a new pair of shoes (that you don’t need), etc. This spending needs to stop for now.
Don’t worry; you can add that spending back later once your debts are gone. But for now, nix that stuff.
Now, let’s get into murdering that outstanding debt.
1. Choose a Debt Repayment Strategy
- Debt Snowball: This involves paying off the smallest debts first while maintaining minimum payments on others. It’s a morale booster and can create a sense of accomplishment.
- Debt Avalanche: Contrary to the snowball method, this focuses on paying off debts with the highest interest rates first. It can save you money on interest payments in the long run.
You pay off debts fast by making extra payments (beyond the minimum), one debt at a time. Start with the first debt until it’s gone, then take that payment amount and apply it as an additional payment to the next debt.
Keep going until all debts have been smashed.
Have student loans? Here are six strategies to make student loan repayment much quicker.
2. Earn Additional Money
- Volunteer for overtime: Is overtime available where you work? If so, consider putting in a few extra hours to pad your paycheck.
- Start a side hustle: Got a business idea? Now might be a good time to give it a whirl (just don’t spend too much money getting it started – focus on getting customers first and foremost!).
- Borrow from friends or family: This can get dicey, so use this option sparingly. But many times, you might have someone in your life who’s willing to help murder your debt.
Think you’re too busy to start a side hustle? Here are nine expert-backed side hustle tips for busy professionals.
3. Get Help
- Talk to a credit counselor: Credit counseling agencies provide guidance and help you develop a debt management plan. They may also negotiate with creditors to lower interest rates or monthly payments.
- Meet with a financial advisor: A good financial advisor will look at your numbers, goals, and aspirations and help you make intelligent choices for every dollar you earn. Here’s how to find one.
- Consider debt consolidation: Consolidating multiple debts into a single loan with a lower interest rate can make repayments more manageable. However, be cautious and fully understand the terms before proceeding.
- Look into hardship programs: Many creditors offer hardship programs for those struggling with payments, potentially reducing interest rates or offering payment deferrals.
Paying off debt with a low income isn’t easy, and it’s definitely going to take time. That’s okay. It is essential to start on your debt freedom journey ASAP and keep focused on it.
You can do this!
See you in your inbox on Saturday,
– Steve
