Since you want know how to get out of debt fast with low income, you should control your daily expenses to get out of debt fast and save money for investment. As you have clicked the article to read, you have strong determination to solve the problem. I believe, you will get out of debt if you seriously apply the given steps. Let’s start.
Why did you borrow money?
Perhaps, you have a good reason to borrow money from others. If you have borrowed money from known persons, you may not pay interest. But, if you have loaned from bank or financial institution, you have to pay interest along with borrowed money. Sorry to say, I don’t know your current situation.
Don’t worry. I have some solutions for both circumstances. If you want to share your present problem, please make a comment below the post or make an Email to Financial Ask. Let’s enter into our main discussion. First of all, you should know the detail about your present debt. Then, you should apply the below steps to get out of debt fast.
Calculate your present debt to get out of debt fast
Calculating your debt amount is the first step to figure out a suitable solution. You can easily calculate your total loaned amount by adding interest with principle. For making the situation easy, let’s imagine your debt amount is 30000 dollars. Interest rate is 10%. How can you get out from 30000 dollars debt within 1 year to 2 years?
The 1st Best Solution: Secondary Income Source to get out of debt fast with low income
Creating the secondary sources of income is the best solution to get out of debt fast with low income. If you are a jobholder, you can create a second source of income from the below list. If you find out a second source of income based on your skill, you don’t compromise your present spending. But, if you are unable to find out secondary income, you should follow the second solution.
Summarize your sources of income
You should summarize your sources of income so that you can understand your need and saving. You may have a one source of income or more sources of income. See the below sources and mark your income sources. If you have not part time income, you can choose one of them.
Job Income
For most people, salary is the primary source of income. If you are a jobholder, your main income is salary. But, the real fact is the amount of earning from your salary. You may work in entry level or mid-level job. How much you earn from your job is the main factor to get out of debt fast. Moreover, you may switch your current job to find out better opportunity.
Rental Income
If you have belonged to any house or apartment, you can get secondary income from renting your property. Most of the people live in the city have no income from rental property. If you have any income from rental asset, you are a lucky man.
Business Income
You may do any part time business to earn some extra money. Based on your skill and available time, you can start any physical business.
Part Time Job Income
In some cases, a full-time jobholder can do any part time job to earn some extra money. You should try to do any part time job to get out of debt fast. From my experience, I had got out of debt by doing a part time job.
Passive Income
You may have one or more passive income sources. If you have no online business, try to do something. You may earn from website, YouTube, Digital marketing etc. Choose one source or two sources of online business.
Professionally, I am Cost Accountant. In my free time, I want to share my experience in my writing. On the other hand, I am a trader and investor. Website and stock investing are my second career. So, you also can start second career based on your skill and time.
Why have I introduced 5 Types of income sources?
First of all, you can’t get out of debt fast if you have no secondary income sources. You haven’t repaid your loan. That means your earning is equal to your livelihood or less than your standard living. You have two options to repay your loan- find out a secondary source of income or reduce your existing living standard.
I don’t suggest you to reduce your living standard rather I request you to create a secondary income. On the contrary, if you are not a frugal in spending, you should control your spending from now. Moreover, you need to learn about how to save money.
If you are serious about saving, you can get rid of debt fast and invest in stock or some other business. Till now, I expect that you will try to create a second source of income.
The 2nd Best Solution to get out of debt fast
Control your spending to get out of debt fast
In this section, you will need a solution to get out of 30000 dollars debt problem. Remember that first solution is creating second source of income. Now you are going to learn second solution- control your spending to get out of debt fast. In order to solve the problem, I need to know your current income.
But, I don’t know. Hence, I think you are a low payee job holder and monthly income is 2000 dollars. And your monthly expenses are 1800 dollars. How much time do you need to get out of 30000 dollars debt? 12.5 years without interest.
If you I calculate 10% simple interest, you will need nearly 14 years to get out of debt. Will your bank wait for 14 years? Just cut short of your daily expenses to get out of debt early. Let’s know categorize your probable expenses.
Grocery Expenses: Currently 40% ($720)
The first unavoidable expense is grocery expenses. Remember that I have imagined your income is 2000 dollars per month. If you cut short 10% of your grocery expenses, you can save extra 10% for paying your debt. Moreover, it is not difficult to cut short 10% expense from your grocery expenses. You just need to make a monthly family budget.
Rental Expense: 38% ($720)
The second unavoidable expense is rental expense. If you live in a rental apartment, you have to allocate 20% to 40% expenses on rental apartment. On the contrary, if you have belonged to an apartment, you can easily save at least 30% expenses.
For a long-term solution, you should buy an apartment to save a mentionable expense. For the above example, I think you are living a rental apartment. So, try to rent a low expensive apartment to reduce at least 10% rent expenses.
Utility Expenses: 4% ($72)
The third compulsory expense is utility expense. You can control utility expenses but can’t ignore whole utility expense. By becoming a frugal consumer, you can cut short at least 1% utility expenses.
Children’s Educational Expenses: 2% ($72)
If you are a father, you have to allocate some income for your children’s education. I don’t suggest you to compromise your children’s future. So, I recommend you to allocate more on your children’s education.
Shopping Expenses: 4% ($72)
Don’t buy unnecessary dresses each month. As you want to pay your debt, you should cut your shopping expenses. For a few months, you need not buy new dresses. So, you can cut short shopping from 4% to nil. Moreover, you can reduce your shopping up to 2%.
Transport Expenses: 2% ($36)
If you have a car, you need not pay something as transport expenses. But a car needs maintenance and fuel expenses. If you use public transport, you can reduce your transport expenses. Just make a short- term plan to minimize your transport expenses.
Medical Expenses: 2% ($36)
In many developed countries, medical expenses are free of cost. But if you live in a developing country, you have to spend some money on medical expenses. You can avoid extra medical expenses if you maintain health guidelines.
Expenses for guests: 2% ($36)
Every month, we have to allocate some money to our guests. Expenses on guests can be controlled. You want to get out of debt. So, try to reduce guests’ expenses from 2% to 1%.
Get together Expenses: 2% ($36)
Do you regularly meet with your friends? I don’t say to avoid your friends and social gathering. But I suggest you to minimize your expenses. If you reduce your get together expenses for a short time, you will get a financial freedom.
Car Expenses: 3% ($54)
Try to use your car more carefully. As you want to reduce car expenses, you can save up to 2% expenses. Try to use public transport. Public transports are less expensive. Moreover, you need not worry for maintenance expenses.
Other Expenses: 1% ($18)
You may keep some money for emergency use. This amount may be used or not. This totally depends on circumstances.
Why have I categorized your daily expenses?
If you read the above portion carefully, you can understand my point. By controlling your spending, you can reduce half of your current expenses. If your current expenses are $1800, you can reduce your expenses up to 40% to 50%.
So, if you make a plan to spend 1000 dollars for your living, you can save 1000 dollars per month. That means you can get out of 30000 dollars debt within 2.5 years! If you follow my advice, you can get out of debt in 2.5 years to 3 years. After 3 years, you can start saving for land invest to build your own house.
Divide Debt into Installments
If you want to get out from 30000 dollars debt, what should you do? To convert your debt into installments, you should analyze your current saving. Then convert your debt into installments. If you control your spending, you can save 1000 dollars each month.
So, divide your 30000 dollars debt into 30 installments. Then pay 1000 dollars per month. After 30 months, you will get out of your debt. If you control your spending for 2.5 years, you will get a stressed free life.
The 3rd best solution to get out of debt fast
You can combine both first and second solution to repay your loan within one year. Suppose, your secondary income is 500 dollars each month. And saving from spending is 1000 dollars. You need 20 months to pay your debt. I suggest you to follow the third solution.
Arrange Money for each Installment
Now time to stick to your plan. I think you have decided to control your spending. But in some situations, you may not follow your plan. One installment miss means, one extra month needs to get out of debt. So, try to arrange money on time for each installment.
To Sum Up
In order to get out of debt fast with low income, you should follow five steps strictly. Firstly, calculate your debt amount. Secondly, create a second source of income. Thirdly, control your spending. Fourthly, divide your debt into installments. Finally, stick to your plan. By following these five steps, you can get out of debt fast.
Founder of The Financial Ask
