Are you living paycheck to paycheck and feel frustrated as you can’t seem to find your way out?
On top of this, you may also have mounting debt that is leaving you scratching your head to find a solution to improve your situation.
This can be stifling and when I was in this exact position, it was hard to find a way to get out and make real change.
Do not fear, there are options available and in this post, I will outline the steps you can take that will teach you how to pay down debt when living paycheck to paycheck along with a free printable that you can use to guide you along the way to becoming debt-free.
Paying off Debt Will Require Facing Your Situation Head-on and Making a Behaviour Change
If you are living paycheck to paycheck, it means you are spending more than your income and this leaves little disposable income to save money and build wealth.
This becomes an even bigger challenge if you have a lot of debt and no real strategy or plan to pay down this debt. It is also likely that your debt may be one of the reasons you are living paycheck to paycheck and will always keep you in this spot if you do not attempt to do something about it.
YOU have to be willing to do what it takes to make some changes in your financial life. If you are living paycheck to paycheck because you want to keep up with the Joneses or because you think caring about money is not important, then you need to assess your financial priorities.
That’s why we are here to guide you. Here are the steps you will need to make this behaviour change and pay down debt.
Step One: Set Up a Budget Right Away
The first step in paying off debt is setting up a budget. A budget is critical because it will help you to track all your expenses and to see how these expenses measure up with your income.
This exercise is very important because you need to see your true financial picture in order to make change.
How will you know how much you need to put toward your debt if you do not know how much money you are making? Or without having an idea of your total expenses?
First, write out your monthly income and then list all your expenses. Dig up all your bills and statements and write out the amount you pay every month.
Then subtract your expenses from your income. If you end up with a positive number, then you have a surplus, if you do not, then you have a deficit every month.
Once you know this figure, then you can start to look at creative ways to pay off debt. You can learn more about setting up a budget in this blog post.
Step Two: Write Down All Your Debts and the Interest Rates for each Debt
You need to understand and face your debt head-on in order to pay it off. You need to know how much you owe, what your interest rate is and understand how long it may take for you to pay it off.
In this step, you need to write down ALL debts. Write down your credit card debt, student loans, mortgage and all other debts you have.
Then write down all the interest rates and time periods you have to pay off these debts. This will help you to prioritize your debt payoff strategy.
This can be a sobering and hurtful exercise as you get to see what you really owe. I call it the Liability Shocker – you see all your liabilities in one place. But do not feel ashamed or feel bad as debt comes in different ways and these are hard times.
Instead, focus on your future and the fact that you are willing to make change and have faith. The mere fact that you are reading this article shows that you are serious and you want your finances to get in order.
Step Three: Look at Ways to Lower Your Expenses
After completing your budget, you will know how much you are spending on your expenses and have an idea of what your true expenses are.
If there are expenses that are unnecessary and do not add value to your life, then eliminate them and only focus on your necessities – housing, utilities, food, transportation to name a few.
This will be tough but in paying down debt, you will need to practice discipline and look at it this way, it’s short-term pain for long-term gain.
Step Four: Look at Ways to Increase Your Income
You can cut your expenses only to a certain point – you will definitely need to look at ways to make more money.
This can be brushing up your resume and possibly looking for another job that pays a higher salary than you currently make. This extra income will help you to pay off debt and give you more wiggle room to get out of paycheck to paycheck living.
Also, look at legal ways to bring in extra income on the side by starting a side hustle. If you have a skill, look at ways you can monetize that skill and bet on yourself and offer it in the market. This can be a real game-changer and there are many stories of people who have very successful businesses today that started as a side hustle.
Step Five: Make a Shopping Plan and Get on a Meal Plan
Food costs usually take up a lot of your expenses and can quickly add up. If you normally eat out and you find that you are constantly overspending at restaurants, then you need to have a strategy with how you spend on food.
Make a shopping list when you go to the grocery store or shop online and focus on buying what you need instead of buying food in a random way.
Also, find a day of the week when you have some free-time and start to make a meal plan for the week. This will help you with your grocery shopping and can be a fun exercise because you can decide on the recipes you are going to make and be excited for these meals.
Take the money you save every month from doing these exercises and put that money toward your debt.
Step Six: If You Get a Windfall, Put That Money Toward Your Debt
If you are lucky enough to receive any extra money throughout the year – whether it’s from a tax refund or if you get a bonus at work, take that money and put a portion of it toward your debt.
At the same time, you should also save some of that money and put it toward your emergency fund in the event of any unexpected expenses.
Step Seven: Automate Your Debt Pay-off
As a big fan of automating your finances, I believe there’s power in allowing your money to automatically do the things we need it to do. This includes saving your money and also in paying down debt.
With all the money you will be finding in going through the steps above, you will need to set up a system to allow this money to go toward your debt. So set up a payment schedule and put all the money you want to go toward your debt to meet this schedule.
Step 8: Find an Accountability Partner or Community
In your debt payoff journey, you will face many challenges and discouragement that can derail you. It’s important to find a safe place where you can be held accountable to get through this process and to keep you motivated.
Your accountability partner can be your spouse or romantic partner, family member, or friend. You can also seek professional support or a community online. Here at Abundance of Jo, we have a community you can access as well as a program that can help you along the way.
How Will Paying Down Debt Change Your Life?
Imagine yourself being on the other side of a debt-free life? A life where you are not always thinking about how to pay off debt and you are instead focused on building assets and enjoying financial freedom.
It’s possible and it can be a thrilling way to celebrate how far you’ve come and help to build your resilience.
Follow these steps and start to pay down debt especially if you live paycheck to paycheck and you will see that you can take control of your financial life.
After reading you should be on your way to know how to pay down debt when living paycheck to paycheck and grab this FREE Printable that will walk you through the steps to pay down debt and use it as your guide.
If you are looking for more financial resources to help you to pay off debt and build wealth you can check out our stop living paycheck to paycheck guide and grab our 90 Day Money Action Plan as well.
Also, check out our Grow Your Abundance Program and work with us today.
Leave a Reply