How to Pay Down Debt While Still Affording Monthly Expenses
One of the most difficult parts of paying down debt is that it can take a large portion of your paycheque to do so, but you still have all the rest of your expenses to cover. Many people struggle to make debt payments while they’re also paying housing costs, transportation, utilities, and more.
However, while getting out of debt isn’t easy, that doesn’t mean it’s impossible. Here are some tips that could help you reduce your debt while still affording all of life’s other costs.
Know What You’re Dealing With
It’s almost impossible to pay off debt if you don’t have a plan, and it’s tough to make a plan unless you have all the information. This means you’ll need to sit down and look at all your debts. Figure out how much you owe on each one, when you’re expected to make payments, how much you’ll need to pay each month, and more. Then look at all your monthly expenses. Know how much you spend each month. A lot of people aren’t sure how much they actually spend, so look at your credit card and bank statements to figure out what your monthly living costs are.
Then you’ll have to come up with a plan to make everything fit and afford all your costs on your income.
Decrease Your Expenses
One way to make it easier to afford your debt payments and your monthly expenses is to spend less each month. Depending on where your money goes, you could reduce your costs quite a lot by cutting back on some things you regularly spend money on. Some ways to save money on monthly costs include:
- Cooking at home instead of buying meals out
- Planning your meals around what’s on sale
- Using coupons for items you’re planning on buying anyway
- Cutting back on alcohol and tobacco purchases
- Planning your errands so you can run them in one trip and save gas
- Walking or biking when possible
- Cancelling subscription services (Netflix, Spotify, etc.)
- Switching to a less expensive cable or cell phone plan
- Having potluck dinners at friends’ houses instead of going out
- Using your own bank’s ATM to avoid paying service charges
- Taking public transit instead of cabs or ridesharing services
Most of these tips will help you save a bit each month. If you add up several small cuts, you could reduce your budget by a decent amount and make your budget balance.
These cuts don’t have to be permanent. Once you’ve paid down your debt and saved some money for emergencies, you can review your budget and potentially increase your expenses once again if doing so makes financial sense.
Try to Earn More
In addition to cutting costs, you can also work to earn more money, either temporarily or full-time. One way to potentially earn a bit of money is ask your employer if you can work some overtime hours. Other options include getting a second job or a “side hustle.” A lot of people make money on the side by selling their skills online. If you can make or do something unique, there’s a good chance you can earn some money doing it.
Another good option is to sell items you no longer need online or at a garage sale or yard sale. Not only can this help you earn some money, but you’ll declutter your home as well.
Stop Adding on New Debt
It’s nearly impossible to pay down debt if you keep adding on new debt. This means you’ll need to make avoiding credit cards part of your plan. Know that living on cash requires more planning than using credit. If you’re using cash or debit to make purchases, instead of a credit card, you’ll have to make sure you don’t overspend and run out of money before you made all your purchases. This means you’ll have to track your spending and keep your eyes on your bank balance.
Talk to your Creditors
While you may be tempted to avoid talking to your creditors when you have debt, it might make sense to give them a call. That’s because you may be able to convince them to lower the amount of interest you pay or adjust the terms on your debt to make it easier for you to repay.
Be honest, explain that you’re having trouble paying your debt and making ends meet, and ask if there’s anything they can do to help you. Creditors have no obligation to work with you, but they might be willing to provide some assistance. It’s worth a try.
Consider Speaking with a Professional
If you’ve done everything you can and you’re still not able to come up with a way to pay your debts and make ends meet, it can be a good idea to speak with a Licensed Insolvency Trustee. They can help you understand the options available to you so you can put yourself on the path towards being debt free.