How to Pay Off Debt, Even When Living Paycheck to Paycheck in 2023

Managing your monthly budget and balancing how to pay off debt at the same time can become tricky and overwhelming. The good news is that there are several ways to shave off your debt while still paying your bills, even if you’re living paycheck to paycheck. 

Did you know that America’s consumer debt is at $14.9 trillion (including mortgages, credit cards, auto loans and student loans)?* By practicing some of the following recommendations for how to pay off debt even while on a tight budget, you can help to chip away at this figure.

how to pay off debt
How to Pay Off Debt | CashFactoryUSA.com

What Does Living Paycheck to Paycheck Mean?

When you make just enough money to cover the bills, or at least the bills plus the minimum required debt payments, as you wait for your next paycheck, then you know what living paycheck to paycheck means. 

By making only the minimum payments on your debts, you won’t substantially reduce the amount you owe. This is because most of your minimum payment goes towards paying interest. Each month, this will result in adding on more debt to your name. So, you become stuck in a cycle where you don’t have enough money to pay existing debts. Therefore, you keep accumulating more debt. 

It’s very important to break the cycle and reduce the principal amount of what you owe, so that your paycheck isn’t being used to pay interest continuously. Sure, this may seem easier said than done. But, that’s why we’ve put together a plan of attack. Keep on reading. 

How Many Americans are Living Paycheck to Paycheck?

As of October 2023, CNBC reports that 62% of Americans are still living paycheck to paycheck.

how to stop living paycheck to paycheck
How to Pay off Debt | CashFactoryUSA.com

How to Stop Living Paycheck to Paycheck and Pay Off Your Debt

Now, here’s the goodness you’ve been waiting for. Take a look at these tips and tricks to help you pay off your debt:

Create a Zero Sum Budget 

One of the most important steps you can take in managing your money is actually monitoring where it goes. This can be done by creating a budget. 

Begin by listing your expenses and debts. In order to achieve zero sum budgeting, you’ll leave no penny unused, hence the term “zero sum”. Separate your income by expenses, debts, and savings. If there isn’t enough money to cover expenses and debts, try to cut down your expenses by removing extras like entertainment. It’s more important to focus on reducing debt and investing money whenever possible.

Cut Unnecessary Spending 

Cutting down expenses can be a challenging hurdle. However, there are many ways to lessen your spending. It helps to categorize your expenses first to see what categories are using up most of your funds. This will help lead you to where you need to focus so you can trim down your expenses. 

Consider these suggestions:

  • If household items that don’t expire are on sale, purchase in bulk and use them over time. 
  • Search for coupons for anything you purchase. 
  • Cook at home instead of eating out.
  • Get rid of subscription services or call your providers to see if lower rates are available for essentials. 
  • Make your own coffee rather than buying a cup a day. 
  • If it’s possible, get rid of your car or drive less (to save on gas) while choosing alternative modes of transportation including: public transportation, walking, biking, etc. 

Prioritize Paying Off Debt

Paying the minimum payment seems enticing because it’s lower than your balance, but that’s the hook that can cost you more money in the long run. By continuing to pay the minimum amount due every time, you’re not reducing the debt by a meaningful amount.   

In order to get out of this vicious cycle, consider paying over the minimum amount. You may not be able to do this for every bill you owe, but you can start by choosing one and paying the minimum amount on your other bills in the meantime. 

There are a few methods for choosing where to begin, but before you choose your preferred method, run a free credit report so you can itemize all your debt. 

The Avalanche Method (or ladder method) focuses on paying off your highest interest rate account first. Then, move down to the next “rung of the ladder” and cover the payments to the account with the second highest rate. Continue this process until you’ve zeroed out your funds. This option will save you money in the long-run because you’re eliminating your highest interest debt first. 

Alternatively, you can use the Snowball Method. This works the opposite way, like a snowball that starts small, rolls down a hill, and collects more snow (and momentum) along the way. Here, you begin with the smallest debt and work on up. While this option is less of a financial approach as you may pay more in interest over time, it’s all about the psychological effects of accomplishing the goal and gaining momentum to stay on track. 

Only you know what method will work best for you. Either way, you’ll have a solid strategy to get rid of your debt by getting started with one. 

Increase Your Income 

It may seem obvious, but increasing your income will help you get out of debt faster. If you’ve tried everything else and your income still isn’t covering your needs, then reconsider your line of work. Or, if you’re happy in your line of work, see if you can add additional income to your monthly cash flow by taking on side projects. 

Leverage Software 

From creating a budget to itemizing expenses, a paper and pen can do the job, but this old school approach can become messy quickly. Instead, try out a free accounting/budgeting software, which will help you to visualize your money. For example, you can try Mint from Intuit, the creators of Quickbooks and TurboTax, which is an online budget planner. 

Have a Support Person 

Managing money is often an emotional undertaking. While it may seem trivial, having a support person along your debt-repayment journey can make all the difference. Pick a friend or family member, or anyone you trust, to hold you accountable for the goals you set. They’ll also be able to celebrate with you when you get out of debt. 

Get Help

It may be the case that you need cash quickly between paychecks. Cash Factory USA payday and installment loans may be able to provide you with a short-term loan that can be deposited into your checking account. It’s not necessarily the best idea to rely on this to pay off your debt as it is still a loan, but if you find yourself in a bind or emergency where you need cash fast and your paycheck is days or weeks away, then it could be a useful option to have. Find out if you qualify by submitting an application. Keep in mind that the use of short-term loans (especially high interest loans) is not recommended as a long-term financial solution.  

Stop Living Paycheck to Paycheck

Climbing out of debt can feel like an uphill battle. When you combine the strategies of budgeting and money management with a positive outlook about your situation, you can definitely achieve this feat. 

Knowing how to get out of debt while living paycheck to paycheck will be liberating as you reach each milestone. Keep your head up, and never be afraid to ask for help. This includes contacting your credit card company to work out a payment plan or seeing if they’re able to reduce your debt with debt forgiveness. 

High-interest loans can be expensive and should be used only for short-term financial needs, not long-term solutions. Customers with credit difficulties should seek credit counseling. The opinions expressed above are solely the author’s views and may or may not reflect the opinions and beliefs of the website or its affiliates. Cash Factory USA does not provide financial advice.

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* This blog contains links to other third-party website that is not endorsed by, directly affiliated with, or sponsored by Cash Factory USA. Such links are only for the convenience of the reader, user, or browser.

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