5 Tips for Getting Out of Debt on a Limited Budget

Wouldn’t it be nice if all debt would just magically disappear? Debt can be so daunting, especially if you are trying to pay down your debt on a very limited budget. When you don’t have much extra money, making debt payments can seem like a waste of money or even seem impossible. It’s also easy to get frustrated when you have a large amount of debt and so much of your payments goes towards interest.
However, you are almost always better off making even a small payment, rather than no payment at all. If you don’t have an emergency fund or you are barely scraping by and can’t even pay your current bills, then you may need to focus on those issues now. However, if you have any available funds, you should be paying off your debt. Here are five ways to get out of debt even with a limited budget.

1. Make a payment plan

A person writing down a budget
Making a monthly budget | Thinkstock

If you want to get out of debt, particularly with a strict budget, you need a plan. Start by determining just how much debt you have and writing down the different lenders that you owe money to. Then, order your payments by which debt you think needs to be paid off first (you can determine this by looking at the amount owed, the terms of the loan, and the interest rate).
Next, you need to determine how much you can afford to pay off each month. Bankrate has a debt pay down calculator that can help. Once you have determined how much you can pay each month, you need to figure out how much of that total amount will go to each loan. Paying off a high interest loan in its entirety has many benefits, but if you have a loan that doesn’t require payments yet (like a school loan) you should also factor that in and probably pay off other loans first.
Another important point is that if you are deeply in debt, you can also attempt to negotiate a repayment plan with your lenders, which may help you reduce your payments or get better loan terms.

2. Set up automatic deductions

automatic setup on computer
Make it automatic with a few clicks | Thinkstock

If you have a limited budget, you might feel that a really small payment isn’t worth it. However, every little bit helps. Setting up automatic deductions will prevent you from falling into the trap of finding different excuses not to make debt payments.
If you have the money taken out of your bank account at the same time each month, you will need to factor that into your budget and pay attention to your account. This will help you to avoid superfluous spending because you will know for a fact that you can’t count on that money. So, determine how much you can afford to pay on your debt each month, and have that money paid automatically.
Usually, automatic deductions are a reliable way to pay bills, but NOLO warns that you should still check your accounts for errors. If the automatic deduction comes out late, or the bank doesn’t make a payment at all (or doesn’t stop making payments you want to stop), then you could face problems, so be sure to check frequently.

3. Cut costs

saving money at grocery store
Cut costs everywhere that makes sense | Thinkstock

This tip sounds obvious at first, but if you are on a tight budget, you truly cannot get out of debt if you don’t cut costs (or it will take you a very long time to reduce your debt). Start by evaluating your monthly spending, and see what you can change. Cutting expenses will leave more available funds to help you pay off your debt. This may mean that you stop eating out at restaurants, cut cable television, or choose to workout at home or outside instead of at the gym.
If your budget is already pretty limited, it can be hard to find places to cut down, but cutting expenses really will help you get out of debt faster — as long as you use the extra money to pay off your debt. Sometimes, even small cuts make a difference, such as making coffee at home instead of running into a store on your way to work.

4. Change your spending habits

spending money
If you want different results, you need to change your current methods | Thinkstock

Initially, this tip sounds a lot like cutting costs, but it’s actually very different. Somehow you got into debt, and there are several potential reasons. You may have debt such as a home mortgage, or school loans, and these debts are probably completely legitimate and even necessary. You also might have debt from poor spending choices in the past. Either way, you have to decide to stop spending now if you want to get out of debt quickly.
This means that even if a mortgage is a reasonable debt, you need to be proactive about paying off that debt, and you also need to be content not to go out and purchase a bigger or more expensive home. If you have credit card debt, you need to stay away from stores (or wherever you are tempted to use your card unnecessarily), and choose not to spend money. Regardless of whether you are a careful spender or an impulse spender, if you truly want to be debt-free, you need to choose to pay debt down instead of accruing more.

5. Get help

professional help
Sometimes we can’t do it on our own | Thinkstock

Seeking help from a credit counseling agency might be a good idea if you feel overwhelmed by your debt, or you are just not sure how to move forward. You can look at the National Foundation for Credit Counseling to get started. You can potentially get free or affordable advice regarding how to deal with your current financial problems, advise on how to manage your money, and even help developing a plan.
People sometimes wonder if they should borrow money in order to pay off debt. If you have multiple different debts, you can consider consolidating your loans. Of course, you want to consider the interest rate and loan details of any new loan you might accept. However, a short-term unsecured loan is very risky, and it’s often best to avoid these if possible. Although few people want to ask their parents or other family members for help, if you know someone who can afford to help you pay off your loans in return for a no-interest (or even lower interest) loan, this might be a good idea if you can agree on the terms.
Having a limited budget shouldn’t stop you from paying off your debt, but it can definitely make it more difficult. These five tips can help.