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Working to pay off credit card debt when you're broke can feel like you’re going up against a dragon with no shield.
You throw a few dollars towards your balance to feed the beast, but it just adds fuel to the fire.
To make matters worse, the balance barely budges and you wind up having to swipe again when you run out of money. Am I right?
I get it because this was totally me! This cycle sucks, but there are ways you can get past it in order to finally pay off your debt.
I’ve been credit card debt-free for nearly four years by using the tips below!
YOU NEED TO CREATE A BUDGET
First things first, if you’re someone who uses the line “I don’t know where my money is going” then it’s time to throw that excuse in the trash.
Yep, that’s right. You need a budget.
There’s no way you’re going to be able to pay off your credit card debt even when you're broke if you have no idea what is taking from your pay.
You’re basically just getting paid and letting life have its way with your money. Uh-uh.
With low income, you’ve got to be strategic with every dollar.
At the beginning of my debt payoff journey, I created my first budget and was horrified. I was a broke college student working a part-time job yet I was spending more than what I was earning.
No wonder I couldn’t keep my head above water!
Without comparing your income to your expenses you may have money leaks that are silently sending your finances up in flames.
Then, you’re behind on bills and trapped in the paycheck to paycheck cycle.
How to get started:
Write down all consistent sources of income, such as:
- Employer wages
- Social security
- Child support
- Depending on whether you choose to budget weekly, bi-weekly, or monthly, calculate how much money you bring in within that timeframe.
Next, write down all expenses such as:
- Minimum debt payments
- Transportation costs
If you have money remaining: add to your budget categories until you have assigned every dollar a job.
If you are in the negative: cut out non-essential expenses and/or reduce them.
Don’t see your budget as restricting
Most importantly, your budget shouldn’t be seen as restricting. They get a bad reputation because people assume you can’t have fun.
This is completely false! In reality, it’s just a way to tell your money what to do.
If you like getting your hair done every two weeks and you have the money to do it then simply put it in your budget!
Depriving yourself of everything that brings you joy for the sake of paying debt is not healthy, and it’s a recipe for disaster.
The second you allow yourself to spend money you’re not going to be able to stop, trust me I know.
Instead, treat yourself in moderation.
SET A "MINIMUM PAYMENT"
And no, I’m not talking about the minimum credit card payment you already have!
When setting up your budget, you get to see how much income you have compared to the number of essential expenses that are taking from it.
From here, decide on how much you’ll apply to your credit card debt and how often. I recommend using the same frequency as your pay periods.
This amount should be more than your actual minimum payment, yet something you know you can realistically afford to apply. If that amount is only $20 more than the minimum, so be it.
Credit card interest is the silent killer, making it extremely difficult to put a dent in your debt if you opt to only pay the minimum. This is especially true for those low income.
How? Because interest charges will gobble up your payment and whatever is left will apply to your actual balance.
Here’s an example that I like to use:
Let’s say you carry a $3000 balance on your credit card with an 18% APR (annual percentage rate). If you maintain the same balance, you’ll wind up paying $540 in interest alone.
Even if you make $100 payments to your credit card each month, it will still take you 40 months to pay it off!
Having a minimum debt payment means that you’ve made a commitment to apply at least that amount to your debt. This gives you more control over your debt payoff timeline.
Any money you have remaining to spare is considered extra.
Posts to check out next:
STOP SEEING YOUR CREDIT LINE AS MONEY
Because it’s not!
This is what makes credit card debt so grueling. Unlike other debts, you have the option to use what you’ve paid which can keep you trapped in what I call the “yo-yo effect.”
This is when you pay down a balance and run it back up.
For years I was trapped in this back and forth motion. If this sounds like you, the reason you might be clinging to your credit line is that:
You’re applying an unrealistic amount
It sounds nice to be able to throw hundreds towards debt but if you cannot realistically afford to apply as much as you did then guess what?
You’re going to have to swipe in order to make ends meet until next payday.
Don’t let your emotions get the best of you and cause you to make too big of a payment!
Set up a rainy day fund
If needed, establish a “rainy day” fund with at least $50. I believe that when you're paying credit card debt on a low income this is absolutely vital.
Whenever you find yourself running low on cash, you pull from this.
This will help to break your reliance on your credit card and keep you from putting yourself deeper into the hole.
This journey is all a mindset game!
If you created your budget then you know you have enough income to cover your expenses, including your debt payments.
You won’t get out of debt without being confident in your ability to pay it off so cut up your cards or hide them from yourself!
You lack self-discipline
All too often we find ourselves spending the money we should be applying to debt or savings.
Instant gratification is real y’all, and it will destroy your finances if you don’t get a hold of yourself.
Keep your goals and the reasons behind them front and center!
TRANSFER TO A 0% INTRO APR CARD
This was an absolute game-changer for me!
When trying to pay off credit card debt when you're broke there’s only so much money you have available.
You’re feeding the beast, aka interest, the best you can but sometimes it’s too difficult to slay alone.
When I learned about this tip I was able to pay off $3,000 in one year without really having to up my payment.
What’s a 0% intro APR?
You may have seen credit card companies like American Express promoting this, but don’t really understand what it is.
An annual percentage rate, or APR, is the amount of interest you’re charged over a year. This rate can be anywhere between 18-24%!
So, when you see a 0% intro APR this means that you won’t be paying any interest during the card’s introductory period!
This period typically lasts 12-18 months, which means your full payment is going to the balance during that time.
For this trick to work, it’s a must that you know your credit score as scores around 650 and above get the best offers. I like to track my score for free using Credit Sesame!
To learn more about how I used this to my advantage, check out this post here!
BRING IN MORE MONEY!
Sometimes cutting and reducing just isn’t going to cut it, especially if you have a huge discrepancy between your expenses and your income.
In this case, the only way to make progress is to increase your income.
I know, you’re already stretched thin but there are so many other ways to do this rather than pick up a part-time job. Your options include:
Picking up a flexible side hustle.
Even as a full-time employee and mom, I was able to bring in up to $400 per month by writing during my downtime!
Declutter and sell what you don’t need.
Look, things that don’t add value to your life are merely just crap and having a household full of it isn’t helping you pay off credit card debt when you're broke, is it? Nope!
Those unwanted clothes that you throw in trash bags? Sell them.
Those home décor pieces that you swore you needed but now no longer fit the vibe of your home? Sell them.
Those appliances that are collecting dust? Sell them.
Those electronics that aren’t being used? Sell them.
What you think is junk is treasure to someone else. Seriously, people buy anything so don’t be afraid to put your items up for sale.
Best places to sell
- eBay – Best for selling all categories of items.
- Facebook Marketplace – Best for selling large items you don’t want to ship.
- thredUP& Poshmark – Best for selling clothing.
Adjust your tax withholdings.
Adjusting your tax withholdings is like giving yourself an instant raise.
If you’re someone who typically gets a pretty large refund, that may indicate that you have too much being withheld from your pay.
Talk with a tax advisor or use a tax calculator to help you determine the best number of deductions for your financial situation.
Take advantage of large sums of money.
This includes tax refunds, court settlements, etc.
Using this money strategically is a huge advantage to those paying off credit card debt when you're broke. All of those times you could barely afford to pay more than the minimum can now be brought up to speed.
Using my tax refunds have played a huge role in my debt payoff journey because as my debt decreased my spendable income increased.
By making a large payment on my high-interest debts, I was able to use more of my pay towards my credit cards.
The most important tip of all is to never give up. Trying to pay off credit card debt when you're broke is not going to be easy.
Consistency is truly key and will carry you through to the finish line.
Establish a payoff plan using your income strategically, believe in yourself, and keep your end goal in mind!
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