How To Get Out Of Debt Fast (Even On A Low Income)

Written By: Zach Buchenau
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overwhelmed woman | BeTheBudget

Getting out of debt on a low income, or when you’re living paycheck to paycheck can feel like an impossible task. But with a well-planned approach, you can get out of debt fast. And just so we’re clear, I’m not some guy blogging about the theory of getting out of debt while I’m, hypocritically, buried in debt myself. In fact, my wife and I paid off $34,101 in just under 6 months using the exact process laid out in this article. And now we live a completely debt-free lifestyle.

I’m not telling you this to brag. (Honestly, I am embarrassed by the amount of stupid debt we were in.) On the contrary, I’m telling you this to prove that it is possible to get out of debt when you’re buried in bills, and financially overwhelmed.

So, if you are tired of paying for your past, and willing to do what it takes to get out of debt fast, you have come to the right place.

Let’s get started.

Take A Breath

Light up sign that says 'and breathe' | BeTheBudget

I speak from experience when I say that debt can lead to some of the most debilitating, overwhelming, and emotional feelings in the human experience. I know the “trapped” feeling you might be experiencing this very instant. I’ve stared down a mountain of debt while wishing my paycheck would just come two or three days sooner. It is a vulnerably feeling. But I can also tell you there is more hope than you can ever imagine just around the next corner; and with the right plan of attack, you will soon experience it.

So, before we get started, take a deep breath. You are bigger, and badder than your situation. You have the ability, and the power to change your circumstances.

But, good decisions are rarely made under stress, so let go of all your financial anxiety. Once you do, your debt will become nothing more than a simple math problem. And that’s exactly what we will address next.

Do The Math

Do the math | BeTheBudget

After separating yourself from the emotional tie you have to your finances, you can begin to treat your debt, and your entire financial situation, like the simple math problem it actually is. And when emotion turns into math, your path to debt freedom will become incredibly clear.

So, grab a pencil and a piece of paper, because we are going to break out your financial situation into a simple equation.

Write Down Your Income

To start your financial math problem, you need to start with your income. So, if you work on a salary, write your monthly income down. If your income is less predictable, calculate your average household income for the last six months, (not including bonuses, or random income you can’t count on in the future). Don’t guess. Find the exact average, to the penny. We need this number to be exact.
Ok. Do you have the number written down? Let’s move on.

List Your Debts

For this part, I want you to write down four things for every debt you owe:

  1. The total principal amount remaining
  2. Your monthly payment
  3. Your interest rate
  4. Number of months to pay off

Important note: if you are listing credit card debt, there won’t be a defined payoff timeline. So, just write down how long you want to take to pay it off.

List All Other Monthly Expenses

In order to address the problems in your finances, you need to know exactly how much you are spending after debt payments each month. Go through your bank account, and add up every expense for the last month.

Once again, be sure to add up every penny. You need to arrive at an exact number.

Now, write that number down.

Get Your Results

Now that you have your income, debts, and all other monthly expenses laid out, it’s time for some simple math. I want you to subtract the sum of your monthly debt payments, and all other monthly expenses from your income. See the equation below:

Income – (Sum of Monthly Debt Payments + Sum of Other Monthly Expenses) = x

This will result in, what I call, your financial wiggle room. In other words, this is how much money you have left over at the end of each month. And, if you’re living paycheck to paycheck, this number might be small, or even negative. But fear not, because the first step in breaking the cycle of debt, and living paycheck to paycheck, is to know your numbers and do the math. Now, it’s time to shake things up.

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Shake Things Up

Shake things up | Girl shaking her head | BeTheBudget

Living paycheck to paycheck is a brutal cycle, and if you want to break it, you are going to have to change the way you handle money.

The good news is that numbers don’t lie. So, now that you have done the math on your personal finances, and figured out how much inflow and outflow you have, it’s time to draw some actionable conclusions, and find some more wiggle room in your finances. If you want to change your circumstances, you first need to be completely honest with yourself, and embrace the changes you need to make to get out of debt.

So what conclusions can we draw from your financial numbers?

If Your Number Is Positive

If the math you did in the last section resulted in a number greater than zero, than you can draw a couple conclusions. The first, is that you still need to break the cycle of living paycheck to paycheck, but your situation might not be as dire as you initially thought. The second is, you need to cut your expenses if you want to change your financial situation. Having a few bucks left over at the end of each month is no way to live, so get out your financial machete, because you need to cut your expenses to the bone in order to get out of debt.

The closer your number is to zero, them more drastic you need to get when cutting your expenses. Getting out of debt is not an easy process, but it won’t last forever. The more extreme you get, the sooner you will be free.

If Your Number Is Negative

If your math resulted in a negative number, it means you are spending more money than you make every month. This also means that on a monthly basis, you are either pulling money from savings, or going into more debt to make up the difference. So, it is time to make some serious changes. This is going to be the toughest part of getting out of debt for you, but trust me, it will be worth it when you finally have some breathing room in your financial life.

First of all, cut up your credit cards. I mean right now. They are harming you and your family month after month, so it’s time to get rid of them.

Secondly, take a look at your debts. Is there anything you can do to get rid of them right now? Do you have a car, boat, RV, or any other motorized vehicle you can sell to pay off a significant portion of your debt? Consider all options. I have even seen people that were so sick of living paycheck to paycheck that they sold their house, because they realized it was the cause of their financial struggle. Nobody said this would be easy, but it is worth it.

Third, you need to examine every expense, and cut out any payments that aren’t necessary. This means your gym membership, online subscriptions, gifts, restaurants, cable. If it isn’t actually critical to your day-to-day survival, you will survive if you get rid of it.

Finally, the biggest problem in your finances might be your income. The truth is, sometimes, you just need to make more money. It is amazing how much one or two-thousand extra dollars every month can do for your financial situation. So, consider finding an extra part-time job you can work weekends and nights. This is one of the best, and fastest ways to get out of debt and stop living paycheck to paycheck.

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Stop Going Into Debt

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If you are living paycheck to paycheck, it’s probably because you have taken on too much debt. So, if you want to break this vicious cycle, you need to stop going into debt in the first place.

Debt is not a tool for your financial situation. Debt is a curse that follows you wherever you go. So, cut up your credit cards, stop taking out loans for anything, and start living by one rule: “If I can’t pay for it in full, I can’t buy it.”

Remember, the deeper you dig a hole, the harder it is to get out. So, stop digging.

Lay Out Your Budget

Lay out your budget | BeTheBudget

Ok, by this point, you have taken a breath, done your math, cut your expenses to the bone, sold some things, stopped going into debt, and maybe even applied for a second job. Now, you need a plan to attack your debt, so it’s time to lay out your budget.

Start With Your Income

A good budget always starts with income. So, grab a piece of paper, and write your income at the top of the page.

List All Your Consumer Debt Payments

You might be thinking that we should start with living expenses, but if you want your debt to be the focus, it should come first. So, just below your income, I want you to write down every monthly debt payment you have. These should be the same minimum payments you wrote down earlier when you were doing the math on your financial wiggle room.

Important note: if you have a mortgage, don’t include it in your debt payments. The goal here is to get you out of consumer debt, like credit cards, student loans and car loans. Mortgage payments will be included in your living expenses.

Once you have listed all your monthly debt payments, I want you to add them up, and subtract the sum from your income. Now, draw a line directly beneath this section, and write that number as your new income number.

Living Expenses

With your new income number (income – debt payments) in hand, list all your monthly living expenses and subtract them from your income. This list should include items you need to survive, like: mortgage/rent, utilities, gas for your car, groceries, etc..

Just be sure to budget enough for groceries. You aren’t going to feed a family of five on a $100 monthly grocery budget. The goal is to create a reasonable action plan with your budget, not starve your family. As a rule of thumb, you should plan a minimum of $200 per person per month if you are being extremely frugal, and only buying food at the grocery store. You can always pay off a little extra debt at the end of each month if you have a surplus of grocery money. But underestimating your grocery budget is a very bad thing to do.

Remaining Money

After subtracting your living expenses from your income, you will be left with a final number that can be used for 3 things (in this order), saving for your initial emergency fund, extra principal payments on your debt, and any remaining, critical expenses. Normally, I would tell you to figure out your savings before everything else, but when you are living paycheck to paycheck, you have to go about things a little differently. The last thing you need is to overestimate your savings, and stretch yourself too thin.

If you worked hard to cut your expenses or make more income, you should have some room to play with here. But before you start using your wiggle room money to pay off debt, you need to build up a security cushion. It’s time to build your starter emergency fund.

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Save A Starter Emergency Fund

Save a starter emergency fund | BeTheBudget

One of the most important things you can do for your financial future–and in the short term–for your debt payoff journey, is to build up an emergency fund. Why? Because, if you start paying off debt, without any money set aside for unexpected expenses, you will likely resort to debt as a way to make ends meet in the case of an emergency. And that is exactly what you need to avoid at every step.

Random medical expenses happen all the time. The transmission in your car could go out. You could have a family emergency that requires purchasing a plane ticket.

Whatever it is, you don’t want to throw it on a credit card in desperation. That will kill any debt-free momentum you have built up.

How Big Should Your Starter Emergency Fund Be?

If you are a Dave Ramsey follower, he recommends saving $1,000 before starting to pay off debt. This is a great guideline in my opinion. However, every situation is different. For example, if you are prone to medical emergencies, you might want to save up $2,000 or $3,000. Or, if you have a car that’s ready to collapse into a pile of parts, you might want to save up $3,000 to $4,000 before you start your debt free journey.

The only thing I would caution against, is spending too much time saving a starter emergency fund. If you wait too long, you might lose sight of your debt free journey, and that is the worst thing you can do. In fact, I wouldn’t recommend spending any more than 3 months saving you starter emergency fund.

Also, in my opinion, saving between $1,000 and $2,000 for a starter emergency fund is just right. So get to it, and protect your new debt free lifestyle with a financial cushion.

Commit To One Payment Method

Dollar bill to symbolize paying in cash | BeTheBudget

Ok, I know you’re eager to get to paying off all that debt you hate, but there is one more commitment you need to make. You need to do your best to stick to one form of payment.

You see, the more accounts, and forms of payment you use, the harder your finances are to keep track of. This is one of the main reasons people end up in so much credit card debt; they are spending money on multiple different cards at once.

Budgeting is a simple process when you only have to log into your checking account to view every transaction you’ve made. And if you are married, this is especially important. By using only one account to make purchases, you and your spouse will have complete transparency in regard to where your money is going each month.

So, you have the choice between cash or debit. Pick one, and stick to it. This will majorly simplify your debt payoff journey.

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Choose Your Debt Payoff Strategy

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Ok, so it’s finally time to start attacking your debt. You have a clearly defined budget in place, a starter emergency fund ready to protect you from going into debt, and a can-do attitude. Now, you just need to decide on the method you want to use to pay off your debt. And, while I will advocate for the debt snowball method (which my wife and I used to get out of debt) all day long, you may be better suited to the debt avalanche method. Here is a short explanation of each, to help you pick the strategy that’s right for you.

Debt Snowball Method (The Method We Recommend)

The Debt Snowball method is the strategy that my wife and I used to pay off all our debt. So I speak from experience when I tell you it is unbelievably powerful. And like so many other people, we learned about the Debt Snowball through Dave Ramsey’s book, The Total Money Makeover. (If you really want to crush your debt payoff, you need to read this book! It will change your life.)

The Debt Snowball is the process by which you pay down your debt with the smallest balance first, while you pay minimums on all your other debts. Then, with each debt you retire, you roll the money you were paying on the retired debt, into the next smallest debt. Before you know it, you are crushing big debts, with big payments. So, your debt payments start to snowball. Then, before you know it, you are paying the sum of all the retired debts towards your final, biggest debt.

The reason this method is so effective, is because it allows you to experience early success in your debt payoff journey, which in turn makes you want to keep going. Plus, the beginning of your debt free journey will be the most overwhelming time. So, getting some quick wins can relieve some stress, and prove that your effort is working.

This strategy is all about momentum, and it just plain works!

Also, if you want to find out how long your debt snowball will take, check out our Debt Snowball Calculator. All you have to do is enter in your individual debt, and it handles all the math, including extra payments, interest, and amortization, to determine how many months your debt snowball will take.

Debt Avalanche

The Debt Avalanche method, is the debt payoff strategy wherein you attack your debt with the largest interest rate first, while paying minimum payments on all your other debts. Then, similar to the debt snowball, as you retire each debt, you roll your payment into the debt with the next largest interest rate.

This method makes the most mathematical sense, but you are less likely to experience early victories in your debt payoff journey, which is why this is not our recommended method.

Attack Your Debt With Intensity

wall that says 'punch today in the face' | BeTheBudget

With so many articles out there, claiming you can paying off debt while living comfortably, you might think you can just ease your way through this process. But I am not going to lie to you. Debt is a destructive monster, and if you want to kill it, you need to get mean, intense, and focused. You need to be “badder” than your debt, otherwise, it just won’t go away.

Living comfortably while paying off debt is like somebody telling you to rip off a band-aid, slowly. It sounds like a less painful option, but in reality, it just prolongs the pain.

If you really want to be done with debt for the rest of your life, jump in full force. Start a side hustle to make some extra money you can throw at your debt. Cut your expenses to the bone. Don’t even think about eating out until you are debt free.

The more focused you get on your debt free journey, the faster your debt will go away. And when you are looking back on your intensity and hard work, you will be proud of the effort you put in.

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Celebrate Your Victories

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Paying off debt requires a lot of sacrifice. So, when a victory comes along–like paying off one of your debts–you need to reward your effort with some sort of celebration. At every turn, it is crucial that you feed your momentum. So, figure out a cheap or free activity you can do to celebrate your victories when they happen.

Buy a bottle of champagne and toast your victory with your spouse. Or, cook a nice dinner. Even something as simple as coloring in a portion of the debt tracker you have hanging on your fridge can be enough to celebrate your success and build your momentum.

Just be sure to celebrate your victories and feed your inner debt payoff beast!

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Never Go Back Into Debt

man standing in sunset to symbolize never looking back | BeTheBudget

If you stick to your debt payoff plan, there is a day not long from now, when you will be completely debt free. Your paycheck-to-paycheck lifestyle will be a thing of the past, and you will finally be able to build wealth. And when that day comes, I want you to remember the struggle that comes along with debt. I want you to recall the feeling of overwhelm and anxiety that debt brought into your life. And I want you to commit to never going back into debt again.

Debt is a trap. Debt is a curse. Debt is a part of your past, not your future.

Tell Us Your Story

Here at BeTheBudget, we love debt payoff stories. So, if you are: just starting your debt free journey, in the middle of one, or completely debt free, tell us about it in the comments. We can’t wait!

Related Questions

Should I save money or pay off debt?

We recommend saving a starter emergency fund before you start paying extra money towards debt. After that, you should prioritize debt over savings, because the interest you will make in a savings account is, likely, much less than the interest you will be charged for your debt.

Should I pay off debt with my savings?

If you have enough money in savings for an emergency fund of $1,000 to $2,000, we recommend using any savings beyond that to pay off debt. If you compare the interest you will be charged for debt, to the interest you will make in a savings account, it makes sense to pay off debt with your savings.

About The Author

About The Author

Zach Buchenau is a web developer, woodworker, and a personal finance nerd. When he isn't writing about budgeting, getting out of debt, making extra money, and living a frugal life, you can find him building furniture or developing websites. He is the co-founder of BeTheBudget, and Chipotle's most loyal customer.

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Zach and Katie, Owners of Be The Budget, and on a mission to help people with their person finances | Be The Budget

We're Katie and Zach, and after paying off $34,101 of debt in 6 months, we now live a completely debt free lifestyle. We believe in God, budgeting, saving, frugality, investing, and working hard to earn a better income. If that sounds appealing, we would love for you to join the journey by subscribing. Welcome to Be The Budget!