6 Tips on How to Get Out of Debt on a Low Income

Learning how to get out of debt on a low income can be incredibly overwhelming.

The paycheck isn’t going up, but the monthly bills, living expenses, and debt payments never go down.

But I do want to encourage you that you have what it takes to pay off your debt even with a low income. It can be hard at first, but if you have the right debt payoff strategies and stay the course, you can be financially free. You don’t have to stay stuck in this debt cycle, so just keep reminding yourself that this is a season and it will pass.

Here are some ways you can tackle debt with a limited income and start getting ahead.

1. Do a Financial Audit and Optimize

First, take a look at your financial situation and analyze your current status to understand how you can quickly crush your debt. So write down things like all of your debts, interest rates, and household income.

And before you create a budget, figure out how you can quickly optimize your finances and lower the amount of money going out. So for instance, you can…

• Call the credit card companies and see if you can lower your interest rates.
• Start finding ways to cut back on monthly expenses. Are there things you don’t necessarily need and can cut out or down on temporarily?
• Start shopping around for cheaper monthly plans with things like your insurance or phone plan.
• Look for different grocery stores that are better priced and start buying in bulk.
• Create financial goals that’ll help get debt out of your life a lot faster. And with that said, here’s the next step.

2. SMART Goals

When it comes to learning how to become debt free on a low income, goals are essential.

And SMART goals can be super helpful when it comes to paying off debt. The acronym stands for Specific, Measurable, Achievable, Relevant, and Time-bound. All of these elements are something you need if you want to be intentional with your money.

So after doing a financial audit and finding ways to optimize, make a SMART goal on how you can pay things off more quickly. And if you want some inspiration on how to make your own, then here’s a quick example of a SMART goal for getting rid of debt.

3. Create a Budget

Now that you have your goal (or goals) in place, you understand how much you owe, and you’ve found ways to cut back on monthly bills and expenses, it’s time to create a budget.

A budget will help you to make a plan for your money and know exactly where it’s all going. And even though you did a financial audit earlier, you might find even more ways to cut back on spending and save more.

I know that a budget might seem a bit like homework, but it’s going to get rid of a lot of stress if your income’s on the lower end.

And if you need a some help getting started, then here are 7 steps that’ll show you how to make a budget.

4. Find Additional Sources of Income

It’s always a good idea to have a side hustle to earn more and pay off debts faster.

So this could be a part-time job, teaching people something you’re good at online, making and selling digital or physical products, or even doing quick jobs for family members.

And while this might feel a bit overwhelming, think about it this way. Once you’re financially free, all of that extra money that went towards paying on your debt will be going straight into your bank account instead.

And if you want some ideas on side hustles and income streams, then here are some great ways to make money in 2025.

5. Start the Debt Snowball Method

Paying off your debt can be challenging, but it really helps when you’re guided by the right strategy and tactics. And a great place to start is the debt snowball method.

To start, list out all of your debts from smallest to largest (don’t look at the interest rates). Then start making minimum payments on all debts except the smallest one.

For the smallest debt, you’ll wanna throw as much money at it as you can until it’s completely gone. And once it is gone, move all the money that went towards paying off that debt to the next one.

Repeat until debt-free.

But why do it this way? Getting quick wins from paying off the smaller debts first creates motivation. But it also builds up energy and momentum like when you’re rolling a snowball.

It keeps you going instead of running out of steam and falling back into the debt trap.

6. Make an Emergency Fund So You Can Stay Out of Debt

Now if you really wanna make sure that you stay out of the debt trap, then making an emergency fund is crucial.

Create a quick goal that’ll help you save up for a $1,000 emergency fund so that if an emergency does pop up, you’re not going back into debt.

So for instance, if you start having car problems, you can use a part of that emergency fund instead of putting it on a card. It’s an incredible way to never have to make payments to credit card companies again.

Pro Tip: Once you’ve saved up $1,000, keep adding to it every week, two weeks, or month. That way it can get even bigger, and if a bigger emergency does happen, you might be prepared.

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