Debt can cause an untold amount of stress, worry and sleepless nights to anyone trying to deal with it, but when you’re on a tight budget, it can bury you completely. When you don’t have a lot of spare cash, it can seem like paying down debts and becoming free from the financial burden is near impossible, especially if you have a lot of debts to deal with.
However, getting out of debt on a tight budget is not completely out of the question and even making small payments will make a difference. Of course, if you are barely managing to cover the rent and pay your bills, your efforts should be diverted solely to that, but if you have even a little cash left over at the end of the month, you should seriously consider using it to pay off your debts and secure a brighter financial future.
Here are some of the best ways to dig yourself out of debt when you’re on a tight budget:
Draw Up a Payment Plan
If you really want to get out of debt, but you’re on a tight budget, the best thing you can do is create your own payment plan. You can do this by going through all of your debts to work out exactly how much you owe and who you owe it to and then ranking your debts in order of the most pressing. Usually, the most pressing debts will be those with the highest interest rate or problematic terms.
Once you’ve ranked your debts, you will need to go through your finances to determine exactly how much you can afford to pay down your debts every month. There are specific debt pay down tools available from the likes of Bankrate, which will help you with this, and once you have a figure, you will be able to work out how best to split that money up to cover all of your debts and start really making a dent in those most pressing ones.
Set Up Automatic Payments
When you’re on a tight budget, you might feel that the fairly minuscule payments you’ve worked out you can afford aren’t really worth the effort, but in the case of debt, every little really does help. So, set up automatic payments to your debtors, to ensure that those small payments are always made, and to remove the temptation of you not bothering because you could use a little extra cash and you don’t think paying a couple of dollars will even make a dent in your debts.
If you do this, remember to take the monthly payments into account when drawing up your budget for the month, so that you don’t risk becoming overdrawn, and make sure that you check your accounts from time to time to ensure those payments are being made and there are no mistakes being made that could hijack your efforts to get yourself out of debt.
Tighten Your Belt
It might seem like a no-brainer that, if you want to get out of debt, you should tighten your belt, but so many people who are already on tight budgets don’t think that they can cut costs even further. Most of the time they are wrong, and there are always things that can be done to save even more money.
In order to determine how much more you could save, you will need to first create a spreadsheet with all of your incomings and outgoings on it. This will show you what you’re spending so you can determine where extra savings can be made. Even if you can save only a few dollars by switching to generic food brands or switching to a more affordable power company, it will make the world of difference and help y0u to get out of debt more rapidly.
Modify Your Spending Habits
If you want to take control of your financial situation, get and stay out of debt, you need to change the way you spend completely. Cutting costs, as mentioned above, is a great place to start, but it is not enough, on its own to help you get and stay out of debt in the long-term. What you need to do instead is to change your spending habits completely. If you’re the kind of person who thinks nothing about hitting the mall for a shopping spree every Sunday, or you’re always looking to upgrade to a bigger home or a better car, you need to learn how to be content with what you have and start spending less right now. You also need to learn how to live without debts. There are sometimes when debts are necessary and legitimate, such as mortgage debts and even credit card or fast cash advance debts that are taken out only to build credit history, and boost your credit score, and then paid off immediately, or debts which are accrued in the case of a real emergency, but for the most part, future debts should be avoided. Spending carefully only in what you need, with a few reasonable treats thrown in to make life fun is the only way to take control of your finances and get out of debt forever.
Consolidate Your Debts
You have to be careful with this because it does not always make paying debts off easier, but if you’re struggling with a lot of different debts and the monthly repayments are beyond your limited budget, taking out a loan to pay off all of your debts and consolidate them into one monthly payment can help you to get on top of things.
If despite trying to implement all of the above, you’re still struggling to pay off your debts, it might be worth contacting the National Foundation for Credit Counseling or similar organizations who can help you negotiate more manageable debt repayment plans with your creditors to give you the breathing space you need to move on with your life into a debt free future.
Living on a tight budget should not prevent your from getting out of debt, providing you really want to do it and these six tips should really help you with that.