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4 Ways to Get Out of Debt on Low to Middle Income – Trident Financial Consulting
Trident Financial Consulting > Blog > Blog > 4 Ways to Get Out of Debt on Low to Middle Income

4 Ways to Get Out of Debt on Low to Middle Income

30 Aug, 2021
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Debt is a problem that many people face. The higher the amount you owe, the more complex your life becomes. The average American owes $90,460, many of whom took out loans at a young age. This makes debt a central part of many people’s lives. Getting out of debt is difficult, but it’s even more challenging for those with low or middle income. 

However, with proper planning and dedication, anyone can achieve financial freedom. If you are trying to get out of debt with a low or middle income, you must be ready to face some short-term sacrifices. To help you get started, here are four ways that can help you achieve a debt-free life. 

Create a total of all your debts.

woman using a calculator to compute her total debt

Knowing how much you owe is critical in creating a successful strategy to pay all your debts. First, make a running total of all your debts. This helps you see everything that needs to be settled, including the corresponding interest rate per liability.

You can arrange your debts by the amount (from biggest to smallest) or by priority (by due date). Next, make a ratio of your total debt to your monthly income. This ratio would be helpful later on when you decide to apply for loans or services.

Once you see everything that needs to be settled, that’s when you make your game plan.

Apply for balance transfer credit cards.

Dealing with pricey credit card on a low income is arduous. Your payments usually go straight to the interest charges rather than the principal balance. If you want to pay off your debt faster, applying for balance transfer credit cards is an ideal strategy. 

A balance transfer is a process of moving all or high-interest debts from one credit card to another with a lower (usually 0%) introductory annual percentage rate (APR). Remember that you have to be careful about the duration of the initial rates.

After the said duration, the rates go back up to their usual high level. This is why if you choose this method, you need to pay off your credit card debt within the introductory rate period. Otherwise, you may be better off choosing another way.

Consider debt consolidation or debt settlement.

get debt consolidation loan form

If you are on a low or middle income, considering these two alternatives can help you pay off your debt faster.

Debt consolidation is a program that allows you to consolidate all your debts into just one loan. This means that you only have to pay a single monthly interest payment. While this seems more time and cost-efficient, some companies offer high nominal fees for the service, which can end up giving you more expenses. Choose a provider who has your best interests and genuinely wants to help you out of your financial struggles.

Meanwhile, in a debt settlement service, a company will work on your behalf to help you negotiate a decrease in your overall debt with your creditors. This usually works for unsecured debts, like credit card balances.

Choosing between the two types of programs depends on your priorities and available resources. For example, if your main goal is to decrease your total debts faster, debt settlement might be better. But if your goal is to maintain your credit score, then debt consolidation is the better choice for you.

Reassess your credit behavior.

young couple talking about their spending habit at the kitchen table

Once you are already aware of your total debt and know what debt reduction technique you can choose, it’s time to reevaluate your credit habits. 

Are you constantly swiping your card for a purchase that’s out of budget? Do you know which type of expense bloats your total debt? Reflect within yourself to see which spending habits you need to improve on.

In the process of introspection, you can also contact us for a free financial consultation. During your consultation, we discuss your goals, priorities, assets, current situation, and available options. Once we know your profile, we can make a tailored plan to help you reach your financial goals. 

Alternatively, you can take advantage of a debt payoff calculator so you can have an idea of how long it will take you to pay off your debt at an expected monthly payment. 

Is it Possible to Get Out of Debt on a Low or Middle Income?

The lower your income, the more important it is to create a plan for paying off your credit card balance quickly and permanently. The thing is, low- and middle-income earners are often forced into making difficult decisions such as choosing between food and shelter; never mind trying to pay down their debts. If this sounds like you – don’t beat yourself up about it! 

Anything is possible with the right mindset and professional help. Contact us today for a free financial consultation and we’ll help you plan your way out of debt.