5 Steps to Getting out of Debt for People With Low Income

Once a person falls into a certain level of debt, getting out can be a real difficulty. It can be especially challenging for those with relatively low incomes; as even though a debt is an important financial obligation, other needs usually take priority.

The good news is that debt, no matter how significant, is never insurmountable. Some people might take longer than others, but it is always possible to successfully manage debt if the person approaches it systematically and with full commitment. 

To provide a better overview of what the process would entail, below are five steps that can serve as a guide:

1. Acknowledge that there is a problem and be willing to change

For low-income individuals, falling into significant debt is usually a sign of problematic financial management. This can be due to any number of factors such as not knowing how to budget and living beyond one’s means.

When tackling debt, it’s critical that a person first understands the reason they are facing financial difficulties to have any hope of breaking the pattern. Without this knowledge, they might successfully pay off the debt only to find themself falling into the same trap in the future.

2. Objectively assess the current financial situation

Similarly, many people who face debt tend to not have enough familiarity with their financial situation. For a person to successfully manage their money, it’s important that a complete accounting of their regular income and expenses is made.

Once this is achieved, a person can then start to budget their money accordingly. They will be able to prioritize and make allocations for each of their needs, including payment of their debts.

3. Find ways to cut back on expenses

With a firm grasp of their financial condition, a person can then evaluate where their money actually goes. The next step would be to find ways of reducing those expenses. It will help to keep track of all expenditures for a certain period of time, allowing a person to see how they spend their money in greater detail.

Once this is achieved, a person must then prepare themself to make certain adjustments in their lifestyle. The idea is to sacrifice unnecessary spending, at least for the meantime, in order to make room for important expenses within the budget.

4. Generate new streams of income

If effective budgeting and cutting back is still not enough to successfully manage the debt, then it might be because a person is simply not making enough money. This problem can only be addressed by finding more income—something that’s understandably much easier said than done.

With that in mind, there are many ways a person can find new sources of income. They can start by working additional hours, taking up a part-time job, or renting out an asset they own. These might sound like difficult choices, but living in constant debt would be far worse.

5. Negotiate with creditors

This step could have taken place sooner, as negotiations can be a lengthy process. Nevertheless, it’s important for a person to take a proactive approach and reach out to their creditors. Most are willing to negotiate the terms of the debt so that payment can be more manageable,

Throughout this stage, a person must remember to provide full transparency so that their creditor can extend the appropriate help. It would also be beneficial to work with professional debt relief services to find the best outcomes possible.

Conclusion

Successfully getting out of debt as a low-income individual is arguably a challenging prospect. However, it is very much achievable as long as the problem is approached deliberately and with careful consideration.

DebtHelpers.ca offers individualized financial consultation services for Canadians seeking personal debt relief. Interested parties can visit the website contact page to schedule a free consultation.