When you are struggling with low income, debt would be the worst fear that you will come across. You don’t need to get stressed with low debt that you have. That’s because plenty of effective methods are available for you to stay out of debt during periods of low income. Here are some of the most effective tips, which you should follow in order to refrain from debt when you are having a low income.
1. Minimize the dictionary spending
As the very first thing, you will need to take appropriate steps to minimize dictionary spending. This is one of the best methods available for people who are having a small income to save a lot of money. This doesn’t mean that you should not go out to eat. You need to make sure that you keep everything in moderation. For example, if you are a person who is going out for dinner on both Saturdays and Sundays, you can think about reducing it only to Saturdays. Then you will be able to save a considerable amount of money while focusing on your happiness. Likewise, you need to take a look at the monthly subscriptions that you have as well. Then you will notice that you are having monthly subscriptions, which you don’t use at all. You need to try your best to get rid of those subscriptions as well. Then you will be able to enjoy your time like never before.
Read more on “living below your means“
2. Invest at least 20% of the income
No matter how much money you are earning, you need to think about investing at least 20% of it. It is one of the best strategies available for you to stay out of debt during periods of low income. If you want to get a better understanding of how much money you should invest out of the paycheck, you are encouraged to take a look at a retirement calculator. Then you will need to see whether you are in a position to afford the retirement or not.
You should also take a look at the different investment opportunities available out there around you. Along with that, you can locate the best investment opportunities available to invest your money. Then you can simply invest your money on those opportunities. This can help you to increase the monthly income that you receive. Along with that, you will be provided with the chance to get out of your debt in a convenient manner as well.
3. Create a list of the debts and income
It is worthy to take time some and create a list of your debts and income. Then you will be able to come up with a proper plan on how to refrain from debt while you are dealing with low income.
When you are listing down the debts, you will need to make sure that you are including certain important parameters. They include the account balance, creditor’s name, interest rate and the minimum monthly payment that you have to bear. Then you will need to understand how much money you will have to pay in order to settle all the outstanding balances of your debt accounts within the next three years. Then you will be able to prepare a list of incomes and see how you are going to pay all those debts with the income.
If you notice that your income is not sufficient to settle debt, you will need to think about the best investment opportunities available out there to consider. Along with that, you will be able to increase the income, which can provide support with settling the debts that you face.
4. Try your best to reduce the interest rates
You should never deal with massive interest rates, especially when your income is low. Then you will be running on a losing race. It will make you owe more and more money along with time. When there is more interest, you will owe more money. This will keep on going in the form of a cycle and you will eventually end up on the losing side. That’s why you need to think about reducing interest rates. The efforts that you put to reduce the interest rates can provide superior assistance during low-income periods.
For example, you can think about getting a credit card, which comes with a lower rate of interest. You must take a look at your credit rating and then see whether you are in a position to go for such a credit card. If you are eligible to obtain a credit card, you must go forward with it. Then you will be able to secure outstanding returns.
You can also check and see if there is a possibility for you to get a balance transfer credit card, which comes with a 0% introduction rate or even a lower interest rate. This will be another good opportunity available for you to control your debts and eventually stay out of it.
If there are any outstanding student loans, you need to try your best to consolidate them. Along with that, you can also think about sticking to loans that have low-interest rates. For example, you will have to pay a lower interest rate on personal loans, instead of credit card loans.
5. Create a debt pay off plan
Last but not least, you need to think about creating a debt pay off plan. In here, you need to think about setting up realistic goals, which can help you to earn more money and reduce your liabilities. Once you create the plan, you will need to think about sticking to it at all times. If you can remain committed to this plan, you will eventually be able to save a considerable amount of money. This can make you end up with outstanding returns at the end of the day as well.