Take Control of Your Finances

It’s possible to get out of debt even if you have a low income. It requires that you learn the following money management techniques in this article:

Acknowledge the Debt You Currently Have

In order to reduce your debts, you have to know what they are. You may have been hiding from your debts, so this is why you must face them now.

Take time to list all of your debts. Make sure that you write down the amount that you owe and the interest rate. Next, write down the terms on each debt and the amount you are paying each month. Lastly, write down the available credit limit on each debt. It’s also a good idea to create a spreadsheet for your monthly expenses and one for your income.

Use Zero-Sum Budgeting to Create Your Budget

Zero-Sum Budgeting

The best way to manage your finances is to create a budget, so don’t be afraid to do this.

Zero-sum budgeting means that when you create a budget, you will designate every dollar of your monthly salary to your bills, savings account and your debts. At the end of the month, you shouldn’t have one penny left over. The first thing you will do is pay your debts and contribute to your savings account. The money that you have left will go toward groceries and other expenses. If you find that you need to reduce the amount of money you are spending, choose to spend less on entertainment.

Examine Your Biggest Expenses and See if You Can Reduce Them

This is the time when you realize that you have to stop spending so much money. If you don’t, you are not going to get out of debt.

Rather than contribute less money toward your debts or your savings account, opt to save money in another area. Find out where you are spending the most money and then decide to reduce this amount. For example, you can purchase your food with coupons, not eat out as often and buy used clothes, furniture or cars. If at all possible, sell your car and take public transportation. A car is one of the biggest expenses because people spend about $9,000 a year on their vehicles.

Watch out for sales at the grocery store, and buy in bulk when you can. Rather than go to your favorite coffee shop, bring your coffee from home.

You Can’t Pay Down Your Debt Unless You Pay More than the Minimum Amount

Spending less money is a good way to start, but now it is time to start reducing the debt you currently have. The thing that you have to remember more than anything else is that you will remain in debt forever if you only make the minimum payments.

If you are like the average American, you have at least $9,600 in credit card debt, and this debt has an interest rate of 15%. At this rate, you would need 12 years to pay the debt in full if you only make the minimum payments! The only way to pay your debts down to zero is to pay more than the minimum amount every month.

The Best Approach Is to Pay Down One Debt and Then Tackle the Next Debt

The truth may be that you cannot pay more than the minimum for every debt if you have several debts, but this isn’t necessary. You only have to choose one, and you will begin to see your debt disappear.

While you are working on one debt at a time, you can pay the minimum amount for your other debts. For example, you might have five debts with a different balance on each one. Each debt requires that you pay $100 every month. With this strategy, you will pay the $100 minimum for four of your debts, but for the fifth debt, you will pay $200. This will only increase your monthly payments by $100. Do this until the first debt is paid in full.

After your first debt has been paid in full, congratulate yourself and then get back in the game. You will pay the minimum amount on your next debt, but pay $300 instead of $200 on this debt. This way, you will continue to pay $600 every month. This strategy is better than paying the same amount for each debt according to the Harvard Business Review. It will make it so that you are paying your debts 15% faster than if you paid each debt in equal amounts.

How Do You Choose a Balance?

You must choose the most appropriate debts to pay first to make this strategy work out. One way is to do the “avalanche” approach when you start with the debt that has the highest interest rate. Then, move on to the debt with the second-highest interest rate. Continue until all the debts are paid in full. Prioritizing your debts with the highest interest rates will make it so that you save the most money on interest.

You may also choose the “snowball” approach. With this method, you will pay the debt with the smallest balance first. This method is like a snowball rolling down hill that gathers speed. For example, you may have a debt equal to $1,000, one equal to $500 and one equal to $200. The first debt you will pay in full will be the $200 debt. Then, pay the $500 debt and finish with the $1,000 debt. This approach allows you to see the progress you are making in less time because it will take less time to pay a $200 debt than a $1,000 debt. It is a way of encouraging you to continue putting your finances in order.

The second technique requires that you pay more in interest, but if you need the incentive that the second technique gives you, it will be worth it.

What Are the Ways to Get Out of Debt?

A money management plan also includes the following techniques that you can use to help you reduce your debts:

Apply for a Debt Consolidation Loan

Debt Consolidation Loan

Debt consolidation isn’t for everyone, but it may be for you if you believe that you cannot repay your debts in six months. The debt should be in the small to moderate range.

To be approved for a debt consolidation loan with a low interest rate, you will need to have a high credit score. If your score is on the low side, you can compare rates from several lenders. You must be committed to repaying this loan. That means that you must make your payments every month and make sure that you aren’t doing any frivolous spending.

Regularly Speak with Your Creditors throughout This Process

When you call your creditors, remember that there is another person on the other end of the line, and he or she may have sympathy for you. If you are having difficulties paying your bills, make sure that you contact your creditors.

It’s not a good idea to wait until the last minute to do this because missed or late payments may be building up. If you talk to your creditors, they may lower your interest rate. They may even give you a vacation on interest payments. Let your creditors know that you are experiencing difficulties at this moment and that you would like to pay your debts in full. They often agree to make these accommodations for you after you experience a health issue or lose your job.

Find a Way to Bring in More Money


Earning more money each month is a great way to pay down debts. For example, you can get a part-time job or agree to work additional hours, rent a room in your home, sell things that you don’t need or apply for a promotion.

If you can manage to make more money, apply every dollar of that extra money toward your debts. Also, put money that you receive unexpectedly toward your debts, like your tax returns, bonuses at work, prizes that you win and gifts.

Make Purchases with Cash Rather than Credit Cards

While you are reducing your debts with one of the methods described above, start paying for everything with cash.

Paying with cash will ensure that you cannot spend more than you currently have. Many Americans spend 15% more money when they use their credit cards, so leaving them at home is an excellent thing to do while you are paying down debt.

Transfer Your Balances to a Credit Card with a 0% Interest Rate

With this option, you will transfer your credit card balance that has a high interest rate to a credit card that doesn’t charge interest for a period of time.

If the amount on your credit card can be paid in the time that you have the introductory 0% interest rate, you will save a lot of money on interest.

You can get out of debt if you create a budget and stick to it, use some of the techniques described above to reduce your debts and work on it until you are finished. It may not be easy, but after you spend a few years living a frugal existence, you will be out of debt and will know how to stay out of debt. Which technique are you going to use to get out of debt?

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