How to Pay Debt Despite Having Low Income


Published on: February 6, 2019 Last updated: July 9, 2020

How to Pay Debt Despite Low Income | Moneymax

Debt is an issue that many people contend with. Paying off debt is a concern regardless of income–but what if the issue is how to pay debt despite having a low salary?

Dealing with debt when you have a low income is a difficult task. Some might even say it’s impossible. However, according to Lisa Aberle of Get Rich Slowly “You have to be determined to challenge your comfort zone, because no matter how uncomfortable it may seem now, challenging your status quo is hard.”

The Challenge: How to Pay Debt With a Low Income

You need to realize that debt puts a real weight on your finances and the sooner you’re done with paying it off, the better. It doesn’t matter if it’s credit card debt or an amount you borrowed from a relative or a friend.

The first thing you need to do is to determine your financial situation. For the purpose of this article, let’s say that you are single, independent, and earning PHP 12,800 every cut-off (after taxes) and have a debt of PHP 45,000.

If you’re determined to get rid of your debt with your income, you need to account for all of your expenses – every little thing from your transportation allowance to the cheap snacks you buy every now and then. You can build a budget, and you should, to help you start paying off your debt.

Read more: What Happens if You Stop Making Loan Payments

The Action: Budgeting + Spending Plan

How to Pay Debt Despite Low Income

However, if budgeting doesn’t work for you, what you can do is create a spending plan to ensure that you pay off your debt first.

Keep in mind that you have recurring expenses to deal with; rent, groceries, and allowances for commute, to name a few. If you’re living on your own, rent and utilities eat up most of your expenses.

Your spending plan will divert a large percentage of your monthly salary towards the debt. For example, PHP 5,000 of your salary will go to your debt payment ever month. This is what your spending plan can look like:

Net Income (per month):  PHP 12,800
Debt Payment PHP 5,000
Recurring Expenses
Rent PHP 3,300
Utilities PHP 1,000
Groceries PHP 1,500
Transportation PHP 1,000
Spending Money PHP 1,000
Total PHP 12,800

Since your income is low, you might need to stop saving money first. Paying off debt and saving at the same time is double, but it’s difficult. Better focus on how to pay debt first then start saving again.

An alternative to increase the rate at which you pay off your debt is to find or create a second income stream for yourself. Get a part-time job or work freelance. Doing this will help you pay off your debt and save money at the same time.

Income from a part-time job will depend on how much work you’re willing to take on. Most freelance jobs can be found online, and are excellent second sources of income.

There are little things that you can do to make paying off the debt easier: prepare your meals ahead of time to eliminate unpredictable food costs or walk/take public transportation instead of booking a ride-hailing service like Grab.

Final Thoughts

The ability to pay down debt is largely dependent on your willpower. People who’ve successfully eliminated high amounts of debt focused on the goal of ridding themselves of debt first, before looking into other goals worthy of their time and money. You can do it. Good luck!

Written By:

With a goal to help Filipinos lead healthier financial lives, Moneymax regularly publishes tips and tricks on personal finance and lifestyle, among many other topics. For more finance-related news and articles, follow Moneymax on Linkedin.