8 Steps to Pay off Debt Fast With a Low Income


One of the biggest killers for any budget is Debt.


Having a large debt load is just the worst when you’re on an already tight budget. When you’re in a position of needing to make every penny count, watching your pennies slip out of your fingers to go pay off the interest on some forsaken loan that you needed but didn’t really want is agonizing. Now, some people think “Yeah! That’s why I just don’t get into debt! I pay everything in cash!”, but honestly? All it takes is one unexpected medical expense to upend that financial tight rope and land a person into thousands of dollars of medical debt. Depending on your State’s laws, that medical debt could get sent to collections in a matter of weeks, and suddenly you’re being hauled into court to pay off an expense you never planned for. When most people think of “emergency” type debt, they think of people going to payday advance places with predatory interest rates and a distinct Mafia vibe, and assume that people desperate enough to go there are stuck with it because they’ve made foolish decisions. It’s easy to judge people who are desperate, but when you live on a tight budget (or you spend exactly what you earn!), then it’s a chance that may never be off your horizon. Whenever I pass a place like that, it makes me so terribly sad, and I say a little prayer: “But for the Grace of God, there go I.” The reality is, if your income is under $120K a year, then it’s always a potential risk. Keeping a high debt load carries a lot of risks: · Small Claims Court costs · Court orders to garnish your wages · Less ability to save for emergency expenses · A heavy mental and emotional burden from constantly living on the blade of a financial knife. Now, some people ask “Is it better to pay off debt, or save money?” and I think the answer is a little more nuanced than one or the other. Again, this is where a budget comes in! When we look at all the streams of income, and then look at all the places our money needs to go (debt, bills, etc), we are able to develop a plan for managing those streams. The ideal thing would be to pay down debt AND save money – even just a little bit set aside from each paycheck can add up quickly.


My best tips for how to pay off debt fast with a low income are these: 1. Gather every receipt, every credit statement, every bill, every scrap of everything that you spend money on. Go through it, sort it into categories of Fixed or Flexible, and record everything. I mean EVERYTHING. Bought a candy bar last week? Write it down. Made an interest payment on your credit card? Write it down. Bought some “I-don’t-need-a-job-I-don’t-need-my-dad-I’ve-got-great-boots-boots”? Write. It. Down. You need to see where your money is going, and find the big gushing holes in your finances, and the little tiny pressure leaks as well. 2. Once you have everything you’ve spent in the last 1-3 months written down (as best you can) then start plugging it into a budget calculator. I’ve provided one here, through Google Sheets, at the end of the post. You can download it, use it on your phone, and any time you make a purchase, you can log it from your phone. Take all your fixed expenses and plug them into the spreadsheet. Housing, Utilities, Tithing, Debt – anything that stays steady from month to month should get logged into your fixed expenses. Subscription services like Netflix are a steady price, but they belong in the Flexible spending category because they aren’t necessary for the sustaining of life. 3. Create an entry for each debt that you hold, along with its total cost. Place the smallest debt at the top of the list, and put them in order of smallest to largest. In the “estimated cost” section fill in the monthly minimum payment. This is the minimum amount that needs to be paid on everything to keep yourself from being sent to collections. It is a fixed expense that must be paid every month. 4. Take a good, hard look at your flexible expenses. Some things, like your grocery budget, can only be cut down so far before you start risking your health. Other things – like a chewing gum habit that is out of hand – can be cut down almost mercilessly. Cellphones are another that hovers the line between necessary and luxury. You need a phone to be able to communicate with employers and your support system, but you probably do NOT need an enormously expensive phone plan. There are plans now for as little as $40/month, so shop around to find the best deal for yourself. Anything that is not absolutely necessary should get trimmed out. I know. It hurts. I get it. Debt hurts worse. You can do it. 5. After you’ve got your flexible expenses cleared down, plug them into the spreadsheet as the estimates for the month. Hopefully by this point your income is either slightly more than your total expenses, or just even with each other. If they’re not, then take a day to rest your brain on it, then go look through your flexible expenses again. If you’re anything like me, you’ll probably find that there are a few things that you thought you “needed” that are really just “wants”, and they can be let go of for a while. If you’ve done this a couple of times, and your expenses still exceed your income, then it’s time to look at increasing your income in some way. (We’ll get to that in another post!) 6. Any excess income should be split into two segments: Savings and Debt Elimination. Put half of your excess into each. This is somewhat backwards from what other people might recommend, but it makes best sense to me, and it works out. So if you only have an estimated excess of $5.00 every month, then you put $2.50 into savings, and you plunk the other $2.50 down on your smallest debt until that debt is fully paid off. 7. As that smallest debt is paid off, you will now have “excess” in your budget. Let’s say your smallest debt had a payment of $20.00 every month, and you were putting $22.50 down on it to pay it off. Now, instead of splitting $22.50 between savings and debt elimination, you’ll put the original excess ($5.00 in this example) into savings, and you’ll take the entire monthly payment of the debt you just paid off, and apply it to the next smallest debt ($20.00 in this example). This is called the “Snowball” method, popularized by Dave Ramsey, and it is one of the best ways to pay off debt fast with a low income. 8. As you continue paying off debts, you can increase the amount that you shift over to your savings account, but make sure that the majority of the excess created from paying off lower priced debts is being rolled over into the larger debts. It can also be worthwhile, if your debt is owned by a smaller private company, to see if they would be willing to stop charging interest on your owed amount. Sometimes accounting departments are able to pull strings and make miracles! You can also inquire about any debt forgiveness programs that they have, especially from a hospital. Another important thing through this period of austere living, is to avoid incurring any new debts as much as possible! Some things are unavoidable but you may find, that by living a frugal lifestyle, you are able to minimize the behaviors that put you in risk of debt in the first place. Whether it is alcohol consumption, a daily sugary treat, or simply being out of the house all the time, frugality often saves us from vices that can cost us money and damage our health. Spending less time driving around means less money spent on gas, and less wear on your tires. Staying home and reading a book instead of hitting a bar or club with your friends means less money spent on drinks and less chance getting mugged while your head isn’t clear.



A life of modest living creates the ability to live well within our means. We have developed a global culture of worshipping excess and opulence, focusing on the glamourous lives of the super wealthy, creating feelings of envy and discontent. We don’t need super wealth to be happy, and many of the people that we see on social media “living their best lives”, are actually not truly living at all. Their self-worth tied to clicks and likes, faking their lifestyles to keep up with the fast-paced world of content consumption. Our lives have meaning when we build ourselves on a sure foundation – our religions, our families, our human connections. No matter what our finances are, those are things that are within our grasp and control! A life of frugality can free up precious time and money to focus on the things that truly matter for ourselves and our children. If you like this post, and would like more of this content, then sign up for our newsletter! We send out emails three to four times a month, with updates to our blog and special offers on our products. We would love to stay in contact with you.

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