How to Pay Down Debt on a Low Income

Oh hey! You're broke and you have to pay off debt? Me too! Isn’t it the best!? I’m kidding. It’s awful. Being low income sucks. Add debt on top of less than awesome wages and being low income can be straight up traumatic.

While I don’t have six-figure debt from school or massive credit card debt (because being low income usually means creditors are LESS likely to lend to you anything anyway, ei. I wasn’t able to even get a credit card until last year at 30 years old.), I’ve still had to navigate playing the debt/credit game with a low salary. 

Is there even a way to pay debt on $15/hr? Definitely! First, Google. There are tons of articles about the practical ways to pay off debt. Namely creating a budget, finding the total amount on the accounts you owe, finding ways to make extra money and not taking on new debt. Yea, duh. Simple enough right? Well, here are some things that people don’t list in those articles that are just as important for paying debt on a low income. 

Are you in a position to pay off debt? Really! If paying it off would significantly take away from your day-to-day needs like food, childcare or paying your rent, leave it. It’s not going anywhere. If paying off debt would put that much of a stretch on your finances, you have more important things to focus on than paying off a credit card. You are the priority here, not your debt. 

Is there any debt that’s a hindrance on your immediate needs? Something like a car loan write off could keep you from getting financing on a new car if you’re in need of one. Having a bank account in collections can keep you from being able to open a new one. If there’s debt that’s an absolute roadblock to getting ahead, start there. If there’s nothing that poses an immediate issue, start with the smaller debt. As a fellow low income worker, tackling the smaller debts first is more reasonable in terms of my monthly budget. It’s a lot easier to save $150 here and $200 there. These small payoffs still boost your credit and don’t leave you more broke. It also creates momentum to keep paying off items until you get to more substantial accounts. Like the $1,500 CareCredit loan I had from fracturing a tooth on kettle corn when I didn’t have insurance. Yes, you can really fracture a tooth and trust it is not cool.

Verify any and all information on debt BEFORE you pay it. Double check that anything listed on your credit report is yours and is the correct amount. Furthermore, ask for itemized lists for medical bills and account statements from other companies. Ask for proof of everything. We are the prime targets for companies trying to get every penny just because we’re low income, make them work for it.   

If you’re looking to take on additional work for extra money, what’s the opportunity cost of getting a side job? If you take on part time work at minimum wage, but you have to spend ¾ of that money on transportation to get to the job and child care for while you’re working, that doesn’t help you. Figure out the minimum amount you need to make per hour/ per session etc. to make the added travel, child care and time away worth it. 

Accept that things will happen at a much slower rate, but they will happen. Be flexible with your debt payoff timeline. Obviously it takes longer to pay off a $200 debt when you can only save $10 a paycheck towards it. That is totally fine. You don’t need to subjugate yourself to the debt payoff gods and live a miserable existence just to pay off a Century Link collections account three months early. They’ll be fine getting what they get. 

Find community support. Truth be told, when I first started getting my finances on track, very few friends were supportive of it. That’s fine. Everyone does things on their own time and you can’t force people to be understanding of what you’re doing. But you do need some support. Find some Facebook groups or follow finance people on IG. You are not alone in your particular journey and having people there to cheer for you when your debt total drops will keep you motivated to drop it further. 

Debt payoff when you’re low income has to encompass more than the run of the mill “budget and earn more money” tips we usually see. Those of us making $30K and under have extra things to consider because we don’t have the financial means or support system to just get at it. To some, those choices might look like spending less on monthly subscriptions or not as many dinners out. For others, debt payoff means substantial sacrifice of personal and family time, mental stability and physical wellbeing. 

Assess the damage and create a plan. It can go against what you see in mainstream financial advice. As long as your debt pay off plan works for your lifestyle, you’re doing it right.