Living a debt-free lifestyle while making little money seems like an impossibility. Yes, it will require patience, discipline, and honesty in the planning process. However, people with meager salaries have done it before and successfully kept debt out of their lives. The fact of the matter is living a debt-free lifestyle isn't necessarily meant for those with high incomes. On the contrary, it can be accomplished by learning the art of financial control regardless of the size of your income. On a low salary, you can ill-afford to waste money on anything that doesn't improve your lifestyle. This doesn't mean you can't treat yourself at times, just that you have to budget your spending carefully.
Read the related article, /how-to-create-a-simple-monthly-budget
What Is Meant by
Being Debt-Free?
A debt-free lifestyle simply means
you owe nothing to anyone financially. No bank loans, credit card balances,
payday loans, personal favors, etc., your monthly income belongs to you in
full.
So, if your income comes to $1,200,
and you have to send out $300 every month to cover debts, then technically,
your income is $900. I am sure that one of the major factors that cause stress
related to finances is debt. Debt robs us of tranquility. Even a tiny debt can
become heavy burden when your salary is modest.
1. Know Your Income
Precisely
To start with, find out your actual
income. No guesses allowed. Put your income figure in writing.
For instance, Maria works in a shop
and gets $1,300 a month. Maria has some additional earnings – $100 once in a
while from her weekends work. Her basic salary is $1,300, and she is not sure
whether she will earn additional money during the month. Therefore, Maria bases
her budget on $1,300 per month.
Why is it crucial? The thing is
that many people plan their spending on money they might earn, thus putting
themselves under debt.
Note down: Your monthly income, Rent,
Food expenses, Travel expenses, Bills, Debts, Savings.
With numbers written down, you can
make the right decisions.
Related article, /best-budgeting-tips-for-beginners
A budget is not about being
punished. A budget is all about planning.
If you have a low salary, keep your
budget simple. Don’t make things complicated.
Sample budget of a person who earns
$1,200 a month:
Rent – $500, Food – $250, Transport
– $100, Utilities – $120, Telephone – $40, Payment on debt – $100, Emergency
saving – $50, Personal expenses – $40.
Your budget will look tight, but
everything works here. It means that a good policy is to cover your basic needs
first. Basic needs include rent, food, transport, electricity, water supply,
and telephone expenses. Everything else is secondary. As I see it, many people
don’t fail because of being lazy. They fail because they don’t know how to use
their salaries properly.
3. Stop Borrowing
Money
There's no way to get out of debt
when you continue to borrow more money.
This is obvious but one of the most
difficult things to do. When you don't have money, taking a loan can be your
only option. Most often, it will create even more problems next month.
For instance: Ahmed takes a loan of
$100 before payday. Once he gets his payday, he repays $100. But now that he
has less money left to spend on his basic needs, he borrows once again. It will
become a vicious cycle.
To end this cycle, you must say no
to loans unless there is an emergency situation.
Tips: Don't borrow money from
credit cards, avoid payday loans, avoid using buy now, pay later services, don’t
borrow money to look impressive in front of people.
Wait before purchasing any
non-essentials.
Related post, /how-to-stop-living-paycheck-to-paycheck
4. Eliminate Debts
Gradually
If you are currently indebted,
don't lose your temper. Create a list of all the debts that you owe.
The list should include: To whom
the money is owed, how much you owe, Minimal payment per month, The interest
rate, if applicable, Finally, select one of the ways for debt repayment.
One of the ways of repaying debt is
the debt snowball method. According to it, you pay off the smallest debt while
making minimal payments on others. Once the debt is paid, you proceed with the
next smallest debt.
For example, you have the following
debts: $150 credit card, A store loan of $400, A personal loan amounting to
$900. So, start with $150. Pay off this debt as quickly as possible. This will
make you more confident.
The second way for eliminating debt
is the debt avalanche method. Under it, you repay the debt carrying the biggest
interest rate.
However, for people with lower
income, the debt snowball method seems to be easier to use because of its
motivational nature.
5. Save Money without
Making Yourself Unhappy
Not everything has to be cut out.
But things which are destroying your money should be.
Begin with small actions: Stop
subscriptions that you do not use, eat out less frequently, try buying things
secondhand, use public transportation where necessary, avoid ordering food to
go, Shop for better telephone and Internet packages and Avoid shopping when you
are bored.
For example, Lisa would spend $8
each day on lunch at work. It meant that she paid $160 each month on work
lunches. She began to bring her own lunch to work and only spent $50 each month
on work lunches. It was a savings of $110 each month. This amount was used to
pay down her credit card bills.
Little savings can yield great
outcomes in the long run.
Also see an article /easy-ways-to-save-money-every-month.
6. Do Not Compare
Yourself with Other People's Lives
It is very risky to compare
yourself with other people. Most of the time, people fall into debt trying to
appear successful. They end up purchasing stuff like phones, fashionable
clothes, cars, and furniture that they cannot afford. The reason behind that is
the same items belong to other people.
The reality is that most people who
seem financially stable actually live under enormous debts.
Sometimes, living without any debt
may not be exciting, as you may end up saying "no" to many
activities. However, peace beats stress.
Conclusion
It is hard to live without debt
when on a tight budget. However, it can be done if you have a simple budget
plan, priorities, and the willingness to say 'no' to debt. Begin from where you
are at now. Budget your finances. Avoid borrowing. Repay your debts gradually.
Build an emergency fund. Try to earn extra money. The key thing here isn't
perfection. The main objective is to achieve financial freedom. A debt-free
life offers you serenity, self-confidence, and freedom of choice. It is
something worthwhile to strive for even when on a tight budget.
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