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How to Pay Off Debt When You Live Paycheck to Paycheck and Have No Money

How do you pay off debt when you’re living paycheck to paycheck and don’t have any money?  I get this question just about every week from readers who want to pay down their debt but don’t feel like they have the income to do it.

I certainly understand that line of thinking.  You’re living paycheck to paycheck, barely making ends meet, and it just seems impossible to pay down debt when you have a low income and little (or no) extra money to work with.

But when it comes down to it, paying off debt is rarely about how much money you make.  Most of the time getting out of debt is more about how you manage your money and less about how much you have.

How to Pay Off Debt When You Live Paycheck to Paycheck and Don’t Have any Money

In this article I’ll show you some great tips to help you pay off debt, even if you have a low income.  You’ll discover there actually is a path to debt freedom even when you have only a small income to work with.

By the way, these same tips work for people at any income level, so if you’re living paycheck to paycheck and ready to pay off your debt for good, keep reading!

What is the Definition of Low Income?

Unfortunately, it’s normal to be in debt.  Of course when you have a lot of debt payments every month you don’t have a lot of money in your pocket for anything else.  This is especially true when you have a modest income to work with.

So what does it mean to have a low income?

Even if you make a good living you may be classified as Low Income depending on the size of your household.

The Federal guidelines define “Low Income” as those who make twice the Federal poverty level.  Using the guidelines for 2015, this is what that looks like for households of different sizes:

Household of 1 = $23,540

Household of 2 = $31,860

Household of 3 = $40,180

Household of 4 = $48,500

Household of 5 = $56,820

Household of 6 = $65,140

Household of 7 = $73,460

Household of 8 = $81,780

What Does Living Paycheck to Paycheck Mean?

I don’t know of any official definition of living paycheck to paycheck.  But what it basically means is that you’re spending all the money you make every month (and usually more!) just to pay the bills and support your lifestyle.  Putting money into savings doesn’t happen.

One of the curious things about living paycheck to paycheck is that it has nothing to do with your income.

There are plenty of high income earners that live paycheck to paycheck too, just like people with small and medium incomes.  It’s not about how much money you make, it’s how you manage it that makes the difference.

Does Income Really Matter When You’re Getting Out of Debt?

Even though your income doesn’t determine whether or not you can pay off debt, there are some differences in how you’ll need to approach it depending on how much money you make.

Paying Off Debt With a Low Income

When you have a small income and you’re paying down debt, things can get really tight.  If you’re in this category, you probably can’t cut your expenses much, if at all.    So it might take you longer to get out of debt than if you had a higher income, but it’s definitely not impossible.

You’ll have to pay extremely close attention to where every dollar goes, and you may have to find ways to earn extra money.  But when you’re diligent, your efforts eventually pay off in a huge way!

Paying Off Debt With a Middle Income or High Income

If you have a middle or higher income, paying off debt will be a little easier for you.  Simply cutting expenses saves a lot of money you can put toward paying off debt without sacrificing any basic needs.

Since you have a bigger shovel (your income) to dig yourself out of the hole, you may not have to cut back as much as you would if you had a smaller income.

But if you have huge amounts of debt, you may have to resort to some of the tips for paying off debt I’ll talk about below that are over and above just cutting back on expenses.

Things You Can Do to Start Paying Down Debt

So there are a few things you absolutely have to do if you want to be successful at paying off your debt.  They’ll set you up for permanent success so that you’ll never have to live paycheck to paycheck again!

First, You Have to Believe You Can Pay Off Your Debt

Especially when you have a modest income, it’s hard to believe that it’s even possible for you to get out of debt.  But in order to get the job done and pay off debt for good, you have to believe your goal is achievable.

You have to tune into the mindset that there are tons of people that have gone before you and achieved the financial success you’re looking for.  In fact, some of them were in worse shape than you before they started.

You can do this!

I’ve written lots of articles on how to change your mindset that’ll get you started.  Here are a few of my best ones:

Abundance vs. Scarcity- Your Mindset Makes All the Difference

Money Comes Easy and Often- How to Create a Wealth Mindset Using th...

Creating a Get Out of Debt Mindset- 4 Tips

Next, You Need to Know Where Your Money is Going

One of the most basic reasons over 2/3 people live paycheck to paycheck is because most people don’t keep close track of their money.

Money flows in and out of their life without a lot of forethought, then at the end of the month they have no clue why they wound up with more month than money.

You have to know how your money flows so it doesn’t leak out everywhere.

Below are the first two things you should do to get those leaks under control.

Keep Track of Your Spending for 30 Days

The first thing I always recommend is to keep track of every dollar you spend for the next 30 days.  You can use the note taking app in your smartphone or a little notebook you carry with you.

It doesn’t really matter which method you use as long as you record every single purchase, no matter how small.

This is a simple but powerful exercise.  It helps you start to understand where your money goes and how it flows.  Plus it gets you ready for the next step, which is learning to do a budget.

Learn to Do a Budget

Once you’ve written down every transaction for the last 30 days, you’re ready to start doing a written budget.  Of course, you don’t have to use a pen and paper if you don’t want to.  Use a spreadsheet, an app, or whatever works for you.

However, your budget has to be very detailed if you want it to work.  Just writing down your bills ain’t gonna get it.  The point of doing a budget is to plan your spending for the next month so every dollar has a specific place to go.

Many times just the act of doing a written budget helps free up a few hundred dollars a month you were otherwise wasting.  If that’s the case for you, then you can use that money to start paying down debt faster.

But if you’ve done your budget, cut every expense to the bone, and your income is still not enough to pay everything, don’t fret!  There are still ways you can make your budget work.  I’ll address that  in just a minute below.

I won’t go into every single detail of how to do a budget, but you can go to the CFF Budgeting page to find posts, free budget...

Then You Can Devise a Strategy to Pay Off Your Debt

Once you know how your money flows, then you can start putting together a plan to pay off debt.

It’s very important to have a written plan to work from.  Most people have a tendency to “wing it”, which usually doesn’t turn out well.  But when you have a good solid plan for getting out of debt, it’s easy focus on paying off debt by working your plan.

It doesn’t matter if you don’t have a lot of extra money.  You can still get your debts paid off in due time just by working your plan.

Here’s a great post that shows you how to put together a plan for paying off all your debt.

How to Get Out of Debt (Part 4)- The Debt Rocket

What if You’re Low Income Isn’t Enough to Pay Down Your Debt?

You might be in a position where your income just isn’t enough to pay the bills.

Yes, I know that sucks.

But it doesn’t mean you’re in an impossible situation and you’ll never get out of debt.  It just means you have to do a few things differently and maybe make a few more sacrifices to get the job done. You CAN do this!

Below are a couple of things you can do to increase your income and get the extra money you need to pay off your debt.

Sell Your Stuff

Everybody has stuff they don’t need and don’t use.  You can sell your old stuff in a garage sale, on Ebay, or even on Amazon!

Sell everything that’s not bolted down!

Get rid of so much stuff that the dog is afraid he’s next!

Sell the stuff that got you into debt in the first place!

Of course, you likely won’t be able to sell enough stuff to pay off all your debt, but it’s a good start.  It’ll get you the traction you’ll need to start making some progress in your situation.

Find Ways to Earn Extra Income to Pay Off Debt

The next thing you can do is find ways to make extra money.  Even $50-$100 every month helps to accelerate paying off your debt that much faster!

But I’m betting you can do even better than that…


Because in the history of the world, it has never been easier to make extra money than it is right now.  With the exponential power of the internet, you can literally run an international business from your living room!

You have access to literally billions of people who want to buy products and services that you can offer with little or no startup cost at all.

I’ve written a ton of articles on all kinds of ways to make extra money which you can find below.

Go to the CFF Money Making Ideas Page

Work on Your Career

I’ve discovered in doing a lot of surveys and talking to a lot of people over the years that there are a lot of underemployed people out there.  I’ve also found there are many more that are unhappy with their job.

Excel at Work to Increase Your Income

One good thing you can do to increase your income is to find ways to be more valuable to your employer.  If you’re just average at your job you can only expect to be compensated with an average wage.

But when you find ways to excel at work, eventually you’ll earn more because you add so much value.  Here are a few ways to make that happen:

  • Get more certifications and training than your coworkers.
  • Do the types of jobs your coworkers shy away from.
  • Develop a reputation as the “go to” person in one or two particular areas at your job.
  • Develop advanced skills that your coworkers lack.

Also, if you feel like you’re not getting paid as much as you should and your employer just won’t budge on a salary increase, then you can always search for a job that pays more.

Here’s a great book I recommend to help you find a career you love:

48 Days to the Work You Love by Dan Miller

Of course, these are long term strategies for making more money.  But they can still help you pay off debt in the long run.

You Can Pay Off Your Debt, Even if You’re Living

Paycheck to Paycheck and Have a Low Income

One thing I consistently teach is that it doesn’t matter how much money you make, it’s about the plan.  Whether you have a low income or make well into six figures, you can be broke if you don’t manage your money right.

But the great thing is that lack of income doesn’t have to keep you trapped living paycheck to paycheck for the rest of your life!

Even if you don’t have any money you can still pay off debt and live life on your own financial terms.  It just takes the right strategy, some hard work, and some patience.  But once you take the leap and do what it takes to achieve debt freedom, you will NEVER go back!

Question: Have you ever let a lack of money keep you from trying to get out of debt?  How did this article change your perspective on that?

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Comment by Chris Conley on January 11, 2017 at 8:04am

I'm always amazed by your content. Great advice and so much value. Keep up the great work.

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