How To Get Out of Debt When Broke…Shall we start by saying this- if you can pay your monthly bills, and have money for food, utilities, and all necessities; you are not completely broke. You are more fortunate than many people, and we believe that you can still alter your spending here and there to get out of debt. We will attempt to give you some instructions to follow.
What Does Being Broke Mean- Let’s Get This Explained First
Being completely broke money-wise means that you have no money left to pay for your basic needs, such as food, rent, utilities, and transportation. It also means that you have no access to credit or loans and that you are at risk of losing your assets or facing legal consequences.
Some examples of being completely broke money-wise are:
- Having to choose between paying for food or rent, or having to skip meals or move out of your home.
- You must try to sell your belongings, such as your car, furniture, or jewelry, to pay off your debts or cover your expenses.
- Having to rely on charity, such as food banks, shelters, or government assistance, to survive.
- You must work multiple jobs, or take on risky or illegal activities, to earn enough money to get by.
- Having to deal with constant stress, anxiety, depression, or shame, due to your financial situation.
If You Are Completely Broke Money-Wise Here Are Some Suggestions
Being completely broke money-wise is a difficult and painful situation, but it is not hopeless. There are steps you can take to get out of poverty:
- Create a budget
- Reduce your expenses
- Increase your income
- Seek professional help, and
- Find support **Most states have a support system in place for those who need it. if you are facing unemployment-there are benefits available. Food stamps, Medicaid, tax credits, etc. There are eligibility criteria and benefit levels.
You can also learn from the experiences of others who have overcome being broke, and use their tips and advice to improve your money management skills.
How To Get Out of Debt When You Can Pay Your Bills and Living Expenses
Take the time to make the budget you keep forgetting to make: money and you
- List your net income (after taxes, insurance, and deductions)
- Break down all of your housing expenses (rent/mortgage), housing insurance if not included in your mortgage, homeowners association dues (if applicable), and any other major housing expenses.
- List your utilities, water, sewage, garbage pickup, heating expenses, cooling expenses, TV cable, etc.
- Personal expenses- phone charges, computer/internet expenses, etc.
- List all of your installment loans (if applicable to include car and personal loans with fixed payments). The aforementioned would also include if you have payments to the IRS for taxes, etc. Your revolving charges -credit cards, home equity lines of credit, etc.
- If you have other expenses such as alimony or child support, those should also be added.
- List the amount of money that you spend on food, eating out, and your pet food and supplies.
- You will also include any expenses for work or school.
- How much do you spend on clothing and necessary home supplies?
Every expense that you have should be listed in your budget. This is the only way to know what your expenses are versus your income.
Once you have listed all of your debts it is time to calculate what you have left after you have deducted all of your expenses from your income.
Then You Must Analyze What Expenses You Can Cut
Here are some suggestions:
- Can you eliminate some of your credit card debts by paying more than the minimal payments? You are advised to take the smallest credit card balance to start this process, pay it off first, and then go to your next card. (If you have more than one.)
- Question and think wisely about this: Would it be a responsible move to refinance your mortgage (if applicable) along with the home equity line of credit (if applicable), or combine other high-interest rate loans in the refinance? **Please note this is not advised if you cannot lower your interest rate and decrease your overall expenses.
- Where can you cut your expenses within your home? Can you make sure you are turning off lights when leaving the room to cut electricity? Do you cut the air or heat down when you aren’t at home? Are you making sure you are not leaving the clothes dryer on too long?
- Have you thought about buying a Roku instead of paying the high cable bill? You can also get lower charges for different aspects of what you and your family like to watch. Yes, you must have the internet, but it can still be much less expensive than cable. YouTube has lots to offer on Roku.
Cutting your expenses is one secure way to eliminate debt. It might be difficult to do at first but if you find ways to alternate and change your preferred choices and habits, it can make a difference.
Additional Methods Are Only Recommended if They Benefit the Purpose… which is to help you get out of debt
- 2nd Mortgage (with a fixed interest rate) to consolidate.
- Home Equity Line of Credit to consolidate your revolving charges *only if you get rid of all of your credit cards, and throw them in the garbage, should apply to both the aforementioned methods. You will not be any better off if you do not get rid of what has made you have more debt.
- Refinance your mortgage loan with a cash-out refinance. Only if you can lower the interest rate on your mortgage and/or reduce the term, as we have stated above.
- Apply for an installment consolidation loan to get all of your revolving charges in one place. An installment loan is always better than a revolving loan.
Summary
Getting out of debt is a great accomplishment for anyone. No, it isn’t as easy as saying 1, 2, 3. It takes a mindset of determination, and sometimes it is a prolonged journey.
It is doable, it will give you more happiness, peaceful living, and a feeling of freedom. Excess debt can be a hindrance to living a good life.
Reading this might help also- Money and Your
If you are interested in trying to make a second income you are welcome to read the following with some suggestions:
There are several posts on work online. I hope this post is of benefit to you whatever your situation.
