No sane person actually wants to be in debt. While yes, there are those who believe it’s a “normal” part of life and that you’ll never escape it, they still don’t WANT to be in debt.
They have dreams of owning a home, no mortgage payments, retired and paying cash for a trip to somewhere exotic. We all do, right?
A lot of people, at one point or another, will get tired of always owing money, and will try to clear debt from their lives to enjoy the finer things life has to offer.
But how are you supposed to pay off debt, when you can’t even afford your normal monthly bills?
That’s what we’re going to talk about here.
Imagine eating a broth soup with a spoon. That spoon has a hole in the center, so some drains out with every scoop. It’s taking you a long time to eat that soup.
Now re-read that sentence with the following substitutions. Broth soup= debt and spoon = income shovel.
You have a bowl full of debt, and the shovel you are trying to clear it with has a hole in the center.
Not the best analogy, but I currently have dinner in the crockpot and it smells divine.
It could be easier to picture the phrase “one step forward, two steps back.”
With your current income not covering your monthly expenses, you end up going into MORE debt, every month. There is no time like the present to start trying to pay off debt and clear this mess. The longer you wait, the more debt you will have.
The very first step in solving this situation is to grab a paper and a pencil.
Step 1 is to write down all of your income, and expenses.
Prioritize that list so that the most important things go to the top of the list. Top = pay first, the highest priority. Examples include your rent/mortgage, food & utilities. Note how much of a difference there is in the totals.
If you only bring in $2,000 a month, but your bills are $2,500, you now know how much you need to find to stop going negative. You can’t pay off debt if you don’t know how much is there every month.
Step 2 is to take this information and make a budget.
Since you did step one of making a prioritized list, this will actually be really simple to put together. A budget is pretty much the same thing, just written differently. Instead of figuring out where your money I going like you did in step 1, you are now TELLING it where to go in this step.
Step 3 is writing down all of your debts.
Make 2 columns on a sheet of paper. In one column, write your debts out the smallest total owed, to largest. In the other column, write them from the smallest monthly payment to the largest monthly payment. Ignore the interest rates, just focus on payment totals as you see on your monthly statements.
Looking at this information, is there any debts smaller enough that you could quickly knock them out if you moved them to priority after your bare necessities? In order– home, utilities, food, pay off this small debt to make it gone forever, then anything else minimum payment.
If you can do this, doing it could be helpful to your situation. Most companies don’t charge late fees until you pass a grace period which is about the same time the next monthly payment is due. However, a lot of places will simply waive this fee if you inform them of your situation.
But getting rid of this tiny debt gives you that one less stress, and slightly less money to pull out of thin air.
Step 4 is figuring out where to cut and how to stretch your budgeted items.
If you don’t currently make enough money to pay the minimum monthly payments on things, some stuff has to go. This is where you double-check that you have your priorities in order.
Look at your monthly bills, and if you have cable, internet, Netflix, subscription packages and are still stopping at Starbucks in the mornings but can’t stop borrowing a $20 here and there from friends and family for gas, your priorities are out of whack.
Calling cable and phone companies and requesting cheaper packages, or canceling all together are both valid and good options.
You could also tell them you need to pause your services for a month or two, because you’re going on a trip or too busy, etc. This gives you little to no payments to make for however long you told them.
Making your monthly expenses have a temporary drop, freeing up more money to pay off debt.
Other ways to reduce your monthly expenses-
- Budget tightly
- Reduce your grocery budget
- Meal Plan
- Turn off lights and try to live in as much natural sunlight as you can
- Unplug TVs, blenders, toasters, microwaves, coffee pots and anything else that you normally don’t. These guys suck electricity even when not in use.
- Sell unused or hardly used vehicles, this reduces your gas, maintenance, and insurance while giving a temporary influx of money
- Downsize your home to a smaller or cheaper place
[Related] Ways to save money on electricity.
Step 5, bring in more money
Once you have cut and limited as much of your expenses as possible, it’s time to start bringing in as much income as possible.
The overall goal of having more money coming in isn’t to simply pay your bills. It’s to pay your bills + pay off your debts.
You want to clear out as much of that broth soup as you can. By cutting your expenses you made that hole in the center smaller, and by adding in more money, your spoon is getting larger.
You can actually see progress being made. It’s no longer 1 step forward and 2 steps back. In fact, it’s more like that exact opposite, 2 steps forward, 1 step back.
Here are some ways you could make additional income, aka Side Hustles
Sell your possessions. If it’s going unused, if it’s old or unwanted, clear it out and make some cash.
Sell anything that isn’t necessary for your everyday life. It means selling the old wedding gown, prom dress, kitchen aid, etc. so be it. You’d be surprised at what people are willing to buy, that we think is either A) trash or B) not worth much.
“Sell so much stuff, the kids think they’re next.” –Dave Ramsey
[Related] The Financial benefits of Minimalism
Apply for state assistance if you qualify, even if you only qualify for $20, it’s $20 you didn’t have before. Plus a lot of state programs link up with utility companies and will reduce your rates.
[Related] Extra Benefits For EBT or WIC Users You May Not Know About
Find a weekend or night job
Amazon warehouse, if you have one nearby, is entry-level and 3 days a week. The pay isn’t amazing but more money is more money.
You can apply and try to drive for Uber or Lyft, but the requirements are tough. It could end up costing you more to fix your vehicles than you’d make as a driver. Or if you consider it an investment and fix up the vehicle, it’s never a guarantee as to how much you’d make driving, so it may take a while to see that income.
Easier to try DoorDash or grocery delivery services for a driving job. I believe at this moment, DoorDash allows you to take your kids with you on shopping trips, although I am not positive. This is just what I heard through the grapevine.
Sell your services, everyone is good at something. Crochet, vinyl, quilting, cleaning, etc. Even if it’s just word of mouth, you can still try to make a few bucks. You’d be surprised at how much money you can make through just word of mouth advertisement.
You can also try to make some money through passive income thanks to rebate apps.
[Related] How to become a successful freelance writer from home
So to recap, to pay off debt when you’re behind on bills you need to:
- Write down all of your income, and expenses
- Take that information and make a tight budget
- Write down all of your debts
- Figure out where to cut your expenses
- Bring in more money
By doing this, your putting yourself in a better place financially. The longer you keep with it, the more results you can see. Eventually and (hopefully soon) you can see that you are no longer going into debt every month and are actually breaking even.
And shortly after that, you may even end up with more money than needed every month. Giving you extra cash to use towards paying off debt.
The more debt you pay, the more money you make, the more you stick to that tight budget, the better your results become, and the faster they become noticeable.