How to Get Out of Debt on a Fixed Income

Debt elimination is challenging. it is even more challenging if you have little to no disposable income left over at the end of the month. If you are struggling to pay down overwhelming credit card debt, you must change your borrowing and purchasing habits. In addition, you must take a strong look at your monthly expenses.

Instructions

1

Calculate your disposable income. This is the amount you have left over at the end of the month after you make all monthly payments. To find this figure, subtract the sum of all monthly bills (credit-reportable) from your net monthly income. This is the amount you have left over for food, clothing and miscellaneous expenses. If this figure is close to zero (or below zero), you will need to consider bankruptcy.

2

Review three months of bank statements. Look for areas to cut back. The easiest areas to cut back are entertainment and eating out expenses. If you are really struggling, you should eliminate these expenses entirely. Consider shopping at a discount grocery store.

3

Speak with a credit counselor. Do not sign an agreement, just go in for an initial consultation. Use the National Foundation for Credit Counseling website to find an authorized agent near you (see Resources). This is a reputable association that approves ethical credit counseling firms.

4

Consider debt settlement if your disposable income is still not enough to pay extra against your bills. Debt settlement will negatively affect your credit score, but it will reduce the principal balances of your accounts, thereby reducing your payments.

5

Pay additional payments against the highest-interest credit card first if you increase your disposable income enough. Make minimum payments on all other bills. Depending on your disposable income, this may be a long process. However, this process will not hurt your credit, like debt settlement, credit counseling or bankruptcy will.