How To Get Out Of Debt Even On A Small Income

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When you begin to face up to the fact that you are in debt – whether that be a relatively small amount or a scarily large amount, it can be overwhelming.

You’re aware of how much money roughly that you have coming in, and how much you generally have left over after bills, so how are you going to pay off all of this debt?!

It may feel impossible. But it’s not! There are some steps that you can take to pay off your debt, just like many people before you have done. Here is how you can pay off debt with no money:

#1 Know EXACTLY How Much Debt You Have

I know, I know, this is scary bananas.

If you have a lot of debt and you are struggling, it’s completely understandable why you would want to bury your head in the sand and not actually know how much you owe in total. But it’s got to be done.

The best way to start with this is to look at your direct debits and standing orders that are coming out – on your internet banking is the easiest way of checking this, or you can look at your paper bank statements. This won’t show you the grand total of your debt – but it will show you the companies that you are paying money out to each month.

Once you have found these, write a list of the companies that you are paying out to, how much is going out each month, and which dates the money is leaving your account.

Now that you know how much is going out each month, to who, and when, you will now need to find out how much you owe them in total, and the amount of interest that you are paying on each one.

Go through all of your paperwork, where it will tell you how much you owe and the interest rates – or ring them up/email them and ask. You need to know this information!

#2 It’s All About The Mindset

Now with something like paying off debt, or anything concerning money in general, it all comes down to the numbers.

Mathematically speaking, it seems pretty obvious what you have to do in order to pay off your debt, doesn’t it? Chuck all of your money at the debt, don’t spend anything, and bring in extra money. Sounds simple, right?

But we are only human. We have needs and wants, we have clever marketing targeted towards us on the TV that we watch, the radio shows that we listen to, on the social media we scroll through, on bus stops, basically everywhere! Is it any wonder that we find ourselves giving into temptation?!

It can be especially hard when your friends and family don’t have any debt or money worries and are happily splashing out their cash on holidays, anything that they see and want without having a second thought about it, and don’t understand why you can’t afford to go out for a meal or similar with them.

Ok, so we’ve established that it can be hard. BUT it can be done.

There are tons of people who are on a debt payoff journey, and loads who have worked really hard and paid off all of their debt and are in an amazing financial position.

You need to find these people! Great places to find them are:

  • Blogs! Personal finance blogs such as mine focus on debt, savings etc
  • Instagram. There is a fab debt free community over there, and you will be surprised at how many people there are with debt-free accounts on there (not just bloggers)
  • Your friends/family. A lot of the time, people keep debt quiet. They don’t want to talk about their struggles with money, but that doesn’t mean that they aren’t having them. Having people close to you who are on the same journey is amazing.
  • Forums – such as Reddit. Just do a search and you will find loads of threads!

You aren’t on your own with your financial situation – there are people who have paid off the same amount – or more – debt than you have, and lots of them have been single, in college, with kids etc – it’s not just people on huge salaries (which is all that I could find when I first started looking!).

Our brain can be VERY resistant to making big (or small!) life changes, because it loves the comfort zone that we are happy to sit in forever.

But don’t forget that paying off debt is a good thing which will benefit you and your family for the rest of your life.

#3 Switch To A 0% Interest Rate

This is hugely important, and is something that I wished I had done sooner in my debt free journey.

If you have debt, chances are that you are probably paying large amounts of interest on it, which is not going to help reduce it quickly for you.

Moneysavingexpert has a great tool where you are able to see if you can do a 0% balance transfer, and it will not affect your credit (just doing the checking part). If you can do a balance transfer, it is so worth it because of all of the money that you will be saving on interest.

However, please note that the 0% interest rate will run out at some point e.g. 6 months, a year or similar – so be aware of what the interest rate will change to and when. Also doing a balance transfer is basically taking out a new line of credit so this is something to be aware of as well.

When I was in debt, it took me a while but I finally changed my credit card to a 0% one and it made a huge difference and enabled me to pay it off that much faster.

#4 Create A Budget 

Budgeting may sound boring and restrictive, but it’s personal to you – you’re the one who gets to decide where your money goes and how much you spend in certain areas.

There will be things that are more important to you than they are perhaps to someone else – it’s all up to you.

My favourite kind of budget is a zero-sum budget (I was doing this before realising it was already a thing!). I’ve got a post describing exactly how to do your zero sum budget, but essentially it’s where you allocate all of your money to something specific.

Buy my budget planner to get started here!

That may sound like a no-brainer, but what most people who don’t budget tend to do is pay the bills, then spend whatever money is left over on themselves (treats, entertainment etc) and then wonder why there is no money to save. I definitely did this when I was younger!

As mentioned, it’s best to head over to my post all about it, but basically with a budget the first thing to do is:

Write down all of your expenses

Go onto your internet banking (or bank statements) and head to the direct debit/standing order section – this will show you all of the bills that come out of your account each month, how much they are, and the dates that they will come out.

It’s worth checking this instead of just doing it from the top of your head because there are probably some little ones that you will forget about.

Don’t forget the expenses that you pay for in cash as well e.g. kids clubs. Also are there things that you pay for annually e.g. car insurance, MOT, tax etc.

Another important thing to remember is to use accurate costs – so for example when it comes to the food shopping you may think that you spend a certain amount, but with top up shops etc, you may be way out on the actual figures.

Go back through your bank statements and add it all up – that’ll be the budget for the month.

Although you may notice some areas can be trimmed down, such as the food budget – leave it as it is for now (so if you’ve been spending £200 a month, leave it at that amount even if you think you can get it down to less) – because you don’t know how you will do until you put it into action. It’s all very well and good saying that you think you can reduce it by X amount, but until you actually try and do it, you won’t know (it may be harder than you envisage!).

List All Of Your Income

Make a list of the income that you have each month, whether that be salary, benefits, dividends, child maintenance etc. If you have income that varies each month, I would suggest that you either go with the average/mean amount that you will get – or the very least.

Do this with your partners income too if you have a significant other, as hopefully you are doing this debt journey together!

Set Up Sinking Funds

There are a few definitions of sinking fund going around, but the most common that I see in the debt-free community is generally where you set up various savings pots for things that you are saving for but will be using soon – such as saving for Christmas presents.

You know that you will be spending money at Christmas, so you have a savings pot specifically for that, that you know you can spend when the time comes.

Other examples could be car maintenance, or home repairs. Anything that you know will pop up and money will be needed for!

Get this budget planner (available in A4 and A5 size) to start the budget that will change your life

#5 Reduce Your Expenditure

This is where the savvy saving and frugal lifestyle will begin to kick in – and you may find yourself up against some resistance from your family – or yourself!

I wrote a post all about how to get your reluctant family on board with your new frugal life.

I’m not suggesting that you sell your house and live in the shed at the bottom of the garden eating only berries and other peoples leftovers – but rather to ensure that your money isn’t being spent where it doesn’t need to be spent.

If you have a car insurance policy for £100 a month, and after spending a bit of time doing comparison quotes you could get it down to £50 a month, that sounds like a no-brainer, right?

Yet so, so many people don’t do it. I get it, it’s effort.

We are all busy people, who has time to sit down and do that?! Well – you do. You have debt that you want to get rid of, you’re paying one company twice as much as you could pay another company for the same service – so it’s time to sit down and find some quotes.

This isn’t just for car insurance either, and you obviously won’t be able to halve your expenses with every bill, but if you aren’t on top of shopping around for quotes when things come up for renewal, chances are that you can make some great savings.

And if you use cashback sites such as Topcashback*, you can get paid for the privilege too!

It may seem overwhelming so maybe promise yourself to do one a day, or start with the most expensive one first, that you think you’ll have a good chance at reducing – this will be great motivation for getting the rest of them done.

Now is the time to be RUTHLESS. What are you paying for that you can cut out completely?

When my ex moved out and I was fully in control of all of the bills, I got rid of our TV package – we were down to free view only (my friend lets me use her Netflix account though, because she is a total gem), which saved me £40 per month – and that was after I had already gotten rid of the sports and movies packages, so it would have been a huge saving overall.

Don’t fret – you can get it again in the future if you really want it – all of this isn’t you saying that you will NEVER have that particular thing again – just that you can go without some things now in order to pay off your debt faster.

Hopefully you will be busy doing things to earn you extra cash that you won’t have time to veg out in front of the TV anyway!

Food Shopping

I’ve noticed that food shopping is something that many struggle to reduce the cost of – and I think a lot of it is because when we go food shopping, we use our stomachs rather than our brains!

That’s why its best to never go food shopping on an empty stomach…you will end up buying a lot of stuff, and a lot of random stuff at that (for me it’s Vimto flavoured sweets).

Groceries is a variable expense – it’s generally different from month to month, even if it’s only by a little bit, but what we want is to get it as low as possible, but not to the point where we have a meltdown and end up running to Tesco and buying the entire contents of Aisle 5.

There are a variety of ways that you can keep your food shopping down, such as meal planning, using some frugal recipes and using all of the tips on this post.

If you are at a really low point with your money/debt and are struggling, please use a food bank. That’s what they are there for – I know that I would use one now if I couldn’t afford to feed my family! If you aren’t sure where your local one is head on over to the Trussell Trust site.

Big Expenses, Not Just The Little Ones

I wrote a post all about this, but in essence, it’s saying that you should look at cutting down your biggest expenses, not just your small ones.

When we first start budgeting, the small things start to go – for example, the daily coffee. Now I’m not saying that you shouldn’t cut down/get rid of this – on the contrary, I think you should do – but my point is that we can focus on the small savings and ignore the potential big savings.

The biggest areas of expense are generally housing and transport. These are also areas of massive resistance, because they can involve sacrifices.

However, at the very least what you should do is see if you can re-mortgage to a lower rate, or use a cheaper method of transportation.

In a more drastic fashion, you could sell your house and get somewhere much cheaper, or rent somewhere cheaper if you are renting.

You could sell your car/s and walk/cycle/bus it around, or get a cheaper car. As I said, these are more drastic – but they only need to be temporary. Could you go without a car for a year or two if it will save you thousands?

If you have a spare room in your house, could you rent it out? Sharing your home with a stranger may sound a bit scary, but it doesn’t have to be a stranger – ask around your family and friends first, or people in work.

It doesn’t have to be every day either – could be weekday only for example (good for a commuter). It’s completely down to you who you allow to live with you, you can be as fussy as you like.

Buy Nothing (No Unnecessary Spending)

Ok this may sound a bit extreme to those of you who are just starting out on their journey, but I promise that it’s easier than it sounds. Have you heard of a ‘no spend day‘?

This is something that I just do everyday without thinking about it, but it’s all too easy when you aren’t on top of your budget to pop to the shops for something everyday, and end up spending quite a lot of money.

I have a post all about a No Spend challenge which should help you with this – the best thing to do is to be fully prepared, and also to understand how much money and psychology go hand in hand.

You can start off with a no spend day, and then increase it to a week/month etc – there are some people who have done a no spend year challenge successfully, and managed to save a ton of money in the process – as well as becoming a lot more chilled out (just from the ones that I have read).

Meal planning will come in handy for preventing you from popping to the shops for extra food and coming out with a lot more than you went in for (I shop every 2 weeks and don’t need to do a top up shop in between) – it’s better to resist the temptation by avoiding the shops all together if you can.

There are fun things that you can do for free (or very cheap) and I have some posts which will help you:

If you are tempted to buy something, have a look on sites such as Freecycle, Freegle or Gumtree to see if anyone is giving it away first (you’d be surprised what people give away for free).

#6 Earn Extra Money

Once your expenses are as low as you can possibly get them, it’s time to get that extra money rolling on in! As with a lot of things, if you haven’t done something like this before, it can be pretty intimidating to know where to begin and if it will be worth it.

When I started earning extra cash, it changed my life. That sounds so dramatic but it really did! I was so miserable, never did anything, went anywhere, never bought anything or saw any of my friends, was struggling so much…earning extra money ensured that not only was I able to pay my debt off that much quicker, but I was able to relax a bit on my personal spending and allow myself little treats to stop me from going insane.

There are a ton of things that you can do to earn extra money, even if you are already crazy busy, such as:

I have a big list of 100 side hustles that you can do – there will hopefully be at least one on there that you can do!

Earning extra will be one of the BEST things that you can do on your debt payoff journey, I promise. You may get tired and be really busy, but it will be worth it. And just think of all of the extra cash that you will have once the debt is gone!

What is your best advice for someone who is struggling with paying off their debt or just getting started?

How to get out of debt on a small income