How to Pay Off Debt When You’re Broke

Reducing debt when living paycheck to paycheck

Is one of your financial goals to pay off debt? It will not happen overnight, but it can be done. It will take budgeting, skipping some of the “extras”, and dedication. We’ll walk through the steps to get set up to make this happen.

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Accessing Your Debt & Options

You’ll need your bills, paper, pencil, and a phone.

1. Write down bills past due

-Name of bill
-Phone number
-Amount owed
-Due date of bill
-Interest, if applicable

2. Call the companies to see what your options are

If there are certain factors that caused payments to get behind (example – lost job, someone sick, etc.), explain what you feel comfortable with.

-Is there a payment plan?
-If it is paid in full by a certain time, is there a discount available?
-Anything else available?
-If there are options, are there special instructions or notes needed when paying?

3. Always document the date you called, what was discussed, and the person you spoke with

It may take more than one call to follow up.

Making a Budget

You’ll need bills, pay stubs, paper, and pencil. One person may put the initial budget together, but to see better success, discuss with your spouse.

It is much easier with a team approach where everyone is aligned with the same goals – paying off debt.

1. Write down how much money is available…. paychecks, tax refund check, etc.

Are there other ways to earn more money?
-Pick up extra shifts at work
-Cut grass

2. Next, write down your expenses

Look at the expenses that are not fixed (fixed example-rent) and see where it can be reduced. These are some common categories that can be reduced.

-Eating out
-Entertainment – manicure, pedicure, movies, bowling, etc.
-Hair – can you stretch out another week or two before getting it cut, etc.?
-Consider a no spend challenge for a certain amount of time – weekend, week, month, etc.   This is for expenses outside of rent, groceries, and other must have costs.
-Review your cell phone plan, home phone, and cable to see if there are better options.

3. Continue to tweak the everything until Income Less Expenses equals zero and extra money is going towards debt

4. Use the information received from talking to the companies above, amount of debt owed, interest rates, etc. to determine which debt will be paid off first

-One method is to pay the smallest debt off first to give you motivation by seeing quick results.
-Another method is to pay the debt with the highest interest rate.
-Consider any discounts if applicable or payment plans that the companies can help you with in determining how to choose which debt to focus on first.

This will take more than a month to pay off most debts. It will take time, focus, and hard work to pay everything off.

Stay focused and motivated by thinking of “Why” you want to pay off the debt. Perhaps it will reduce stress or maybe it is, so you can pay off your house loan or buy a house.

If you are interested in a more detailed course, click here to see Cash Fueled Life by Kim Anderson. It is a great information where she breaks it down in writing and has a few videos included too.

Access your debt by determining what your options are by discussing with the companies that the money is owed to. Plan to reduce the debt by making a budget. There will be difficult choices to make to reduce expenses or increase income to have extra money to reduce debt. The budget should be adjusted until  Income Less Expenses is zero.

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Reducing debt when living paycheck to paycheck


Do you want to pay debt off, but are broke? Living paycheck to paycheck, you're not sure how this can happen. There are several steps to take to make this a reality.

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