Low Income? Here's How to Get Out of Debt

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Even if you don't earn much money, it is possible to get out of debt. Here's how.

There are few things more irritating than being reminded that you need to pay off debt, particularly when you are living paycheck to paycheck. If you find yourself stuck between a rock and a hard place -- frustrated by debt but convinced you can never pay it off -- we've come up with a list of seven suggestions to dig your way out, even when the hole feels too deep.

1. Earn more money

Earning more money, whether it's by taking on a side hustle or starting your own small business, is an obvious way to pay off debt. And if the idea of adding to an already-packed schedule makes you break out in hives, we're here to tell you that creating a new stream of income does not have to be awful. 

You can get paid for helping people out with small tasks around their homes, shopping for shut-ins, tutoring in a subject you enjoy, or cooking for people who don't have the interest and/or talent to cook for themselves. 

The point is this: We know that it's tough to be told you need another job when you're already so busy. Our advice is to choose something you know you'll enjoy and earn enough to dig yourself out of debt. Once you're near the finish line you can reassess whether you want to continue the job.

2. Decide what "broke" really means

Shortly after college, a friend admitted that she was struggling financially. She also admitted that her spending habits were the reason she was "broke." She said that she couldn't help but spend every dime she earned buying anything that struck her fancy, even if she didn't need it. When I mentioned the possibility of putting money away, she told me that, if she did, she would have so little to save at the end of the month it wouldn't be worth the trouble. 

Refusing to tuck a few dollars away when you have it is just plain silly. 

“Broke” means not earning enough to pay for food or shelter. If your basic needs are being met, it is likely that you can find a few extra dollars each month to pay extra toward a bill.

3. Review your spending

Ask anyone who reviews their bank account each month why they do it and they're likely to tell you that they want a better sense of where their money is going. 

Take a look at what you spend money on. Are you paying too much for parking? Do you have satellite radio in a car that is rarely turned on? Do you still have a membership to a club you never use? There is no judgement here. We all get busy and it's easy to let small outlays of money slip through the cracks. 

Sometimes, simply tightening the belt a bit is enough to help you divert that money toward high-interest debt that you want to pay off.

4. Stop taking on more debt

If you're already feeling the pinch of debt, stop taking on more. That means driving a car a few years longer than you expected to, saying no to pre-approved credit card offers, and waiting until you have cash to buy something you would normally charge.

5. Talk to your kids

Let young children know that you're doing fine but are working toward doing even better. That means working as a family to discern "needs" from "wants" and using money responsibly.

If you have children who are quickly approaching college age, let them know upfront how much you will be able to help financially, and be proactive about helping them search for grants, scholarships, and part-time jobs that can help them keep the cost of their education to a minimum. 

6. Leverage your good credit score

If you have a healthy credit score, request a lower interest rate from your creditors. If they won't go for it (and many will not) consider transferring the balance on high-interest credit cards to a card with a lower interest rate or to a low-interest personal loan

7. Deal with less-than-perfect credit

If you need help, there are nonprofit agencies like the Consumer Credit Counseling Service (CCCS). Keep in mind, credit counseling agencies negotiate with your creditors to lower your interest rates, but they pay them once a month, often after your payment is due. What that means for you is that your credit report will show late payments for each month you are enrolled in the program. 

Your best bet may be to call your creditors directly and tell them that you plan to work with a credit counseling service but would rather work with the creditor directly. Ask them to lower your interest rate and arrange for them to take the new, lower payment directly out of your checking account each month so that it is never paid late. 

Your credit report may still show that you're paying less than the originally agreed upon amount (depending on the creditor and how they report it), but it is better than years of late payments showing up.  

The bottom line

Although it may be of no comfort right now, debt happens to millionaires (and billionaires), too. For many, their level of debt is proportional to the amount of money they earn. 

While there is no magic formula for getting out of debt, it can be done. You must be willing to chip away at it one debt at a time, realize it will take time, and keep in mind how great it's going to feel when that final debt is paid off.

RELATED: If you absolutely need a credit card, here is The Ascent's guide to the best credit cards for low income.

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