Effective Debt Reduction Tips And Strategies For Low Income Earners 1

Admin | 7:17 PM |

A common problem faced by low income earners is how to pay off their current debts on their current income. While the task may seem too tough, there are a number of things you can be doing to make it a whole lot easier.

The first thing you need to do is add up all your debt. In order to get out of debt, you need to know how much you owe. Make a list of your creditors and the amount you owe noting what needs to paid off first. Listing them in order of importance such as rent, food, and utilities can help you decide how to divide your payments.

If you don't have a lot of money to pay off your debts, selling some items you own can make some extra money. Search through your attic, your house and garage for items that you either don't need or use anymore and have a garage sale. Selling online is another way; sites like eBay can find many buyers all over the world. Bear in mind you do pay to list on this site and then pay a percentage of the sale price as well. Always add at least part of the shipping cost to the item to make the item appear more attractive to buyers. You can then use this money to pay off some debts.

You might have to sell off some assets like your car or even your home. Renting can end up being cheaper in the long run as many apartments do include utilities in the rent. Selling your car can give you some cash especially if you are on a public transit line and can still easily get around. This also saves on gas and insurance costs as well as car payments. If you need a car, buy a used car and if you can, pay it off right away to avoid those monthly car payments.

One strategy is to pay off in full your smallest debts first, leaving you with more money to service the larger debts. You still need to make sure you are meeting your minimum payments on credit cards or other loans.

Finally you need to work out a budget and stick to it like glue. Having a plan is no good if it doesn't get used. Always try to put away at least a little bit of money as savings - you never know when a rainy day fund will come in handy.

1 Responses So Far:

Anna said...

The first step to get rid of your debts is to analyze your financial situation. Once you’ve done an analysis of your financial situation, you will be in a better position to think about debt reduction strategies. Snowball method and debt avalanche method are two good ways of reducing debts. In the snowball method, you will have to pay a minimum amount toward all your debts and make extra payments toward the account which carries the lowest balance. Repeating the same process in case of all the bills will help you pay off your debts. In case of debt avalanche method, you need to pay minimum amount toward all the accounts whereas make extra payments toward the debt account which carries the highest interest rate.

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