The Average American carries around $38,000 in personal debt. When you consider stagnant wages and the fact that personal debt doesn’t include mortgages, it’s easy to see why most Americans are struggling financially.
If you find yourself drowning in debt with very little money left at the end of the month, don’t panic. Keep reading to discover how to get out of debt on a low income.
Seek Debt Relief Alternatives
Wondering how to become debt free on a low income? The first step is to seek out debt relief alternatives and find out what you qualify for.
Write down every single debt you owe and the company which holds the account. Then start reaching out to each one individually asking about debt relief options including debt forgiveness, settlement payments, or debt consolidation. Companies usually don’t inform you of these options unless you ask because it could mean less money for them in the long run.
There are even debt relief options that aren’t tied to a certain company. Read this article if you’re looking for more information about what is the national debt relief program and if it’s the best option for you.
Come Up With a Plan
When it comes to how to get out of debt, you need to have a solid repayment plan in place. One of the more popular plans is called the snowball method.
List all your debts from smallest to largest. At the end of every month, you’ll put every extra dollar into the smallest debt on your list. Then, once that debt is paid off, move onto the next smallest.
This plan allows you to feel the excitement of getting rid of debt quicker. Also, the amount you pay at the end of the month will grow as you pay off more and more debts — just like a snowball grows.
Build Up an Emergency Fund
Want to know the secret of how to get rid of debt? Don’t put every cent into paying off debt, instead make sure you have an emergency fund built up.
When an emergency strikes — and one will — you don’t want to have all your cash tied up in expenses. Instead, you’ll want an emergency fund available so that you don’t have to take on new debt to cover the costs.
It’s recommended that everyone have at least $1,000 in an emergency fund. While this isn’t much, it is more than 40% of American households have. If you want an amount that offers a little more protection, opt for three to six months worth of expenses.
Now You Know How to Get Out of Debt on a Low Income
After reading this article, you now have a better understanding of how to get out of debt on a low income. Just because you don’t make a six-figure salary, that doesn’t mean you’re destined to live paycheck to paycheck for the rest of your life.
Start by seeking out debt relief alternatives to ease some of the burdens. Then, come up with a debt repayment plan that will work best for your situation. Finally, don’t forget to build up an emergency fund so that you can concentrate on getting rid of debt instead of taking on new debt.
Looking for more ways to take control of your financial future? Be sure to browse the rest of this site for more informative content about everything finance related.