How to pay off debt when you’re on fixed income

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Paying off debt can be a real burden on anyone, but it can be especially difficult for those who live on a fixed month-to-month income. Americans on fixed incomes include groups like retirees who no longer receive a regular paycheck and instead rely on a pension or Social Security income.

While it may be more difficult to pay off debt on a fixed income, it is possible. Try these three tips to help you say goodbye to debt and hello to more financial freedom.

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1. Redo your budget

The easiest of the three options is to simply re-budget. Review where you allocate and spend your fixed income each month and see if there are any changes you can make. Are you paying $ 120 per month for a cable plan you barely use, or $ 100 for unlimited cellular data even though you’re still on wifi? Or maybe you’re paying $ 100 for the highest speed internet when you only open your laptop to read the news? These scenarios leave a lot of room to rework your budget.

You can, for example, cancel that expensive cable plan and go for a Netflix subscription ($ 8.99 to $ 17.99 per month, depending on which plan you choose) until you reduce your debt. That’s over $ 100 a month that you can reallocate towards debt payments. Take this scenario one step further and say that you also go for one of the cheapest cell phone plans around. A popular carrier is offering $ 35 per month per line for two unlimited data lines for those 55 and over. There is still $ 65 saved. And finally, you can probably cut your internet price in half – or at least get a big deduction – by lowering your speed. All inclusive, you get around $ 200 in savings per month just by making these three changes.

The above scenarios don’t even address other budget categories you might look at, like lowering your grocery bill, eating less at restaurants, or cutting back on living room trips. Every dollar that you can save in your budget can be used to free yourself from debt. And the sooner you are free from your debts, the sooner you can welcome back some of those luxuries that you have cut.

2. Consolidate your debt

Debt consolidation is a great option for several main reasons:

  1. It consolidates all your debts so that you only make one payment instead of several.
  2. You usually pay much less interest on the consolidated debt.

Eliminating the need to track and pay multiple debt payments each month takes a lot of the stress out of the equation. Instead of paying four credit card companies and one or two personal loans, you can make one lump sum payment that covers all of those debts at once.

There are several ways to consolidate your debt, including:

Any of these options might work better for you than the others. Personal loans are a popular option because they usually charge much lower interest than credit cards. There are personal loans for people of all credit scores, from personal loans for bad credit to personal loans for excellent credit scores. Also, unless you take out a secured personal loan, unsecured personal loans don’t require you to put anything on the line to get your loan. This makes it a pretty safe option for consolidating your debt.

If you have an amount of debt that you think you can easily pay off in a year or so, then a 0% introductory rate balance transfer credit card might be the perfect solution. As long as your credit limit is high enough to cover all of your debt, and you pay off the debt within the introductory period (usually 12-18 months), you won’t pay any interest using this method.

If your debt amount is higher, but you own a home with decent equity (the amount of your home that you own in full), you can take out a loan against that equity. However, you are putting your home at risk with a home equity loan, so you need to be sure that you can make the payments on time. Home equity loans usually come with much lower interest rates than what you pay with credit cards, so they might be a good option for you.

3. Treat yourself

Ancillary activities are not reserved for young people and the underprivileged. There is work nearby for all walks of life. Do you like to take a daily walk in the neighborhood? Add some furry friends to this walk and get paid for doing it. Do you like giving your opinion on products and services? Sign up for a survey or review site and get paid for submitting your ideas. Do you have a few free hours in the evening and you like to knit? Prepare mittens or blankets and sell them for cash. Any dollar you can contribute that is on top of your fixed income can go a long way towards paying down your debt.

Getting out of debt is no easy task, and it can be made even more difficult with limitations like a fixed income. But as far as it sounds to you, your situation is not hopeless. There are still ways to dig. Put one or more of these tactics into action today – your personal finances will thank you.

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