How to Avoid Debt on a Limited Income

( – Avoiding debt is hard — especially if you’re on a limited income. Seniors often operate on fixed incomes, and low-income households feel the strain as they’re pushed to live paycheck to paycheck. Even six-figure families (nearly half of them) live paycheck to paycheck. With expenses piling up and inflation on the rise, it’s no wonder people get into debt when they have to put emergencies on credit cards.

Being in debt is harmful, though. Debt causes stress and strain, which can add tension to a person’s relationship. Debt causes strain on one’s physical and mental health, too. When you’re financially stable, it’s always easier to deal with the emergencies that crop up rather than looking at them from a point of sinking debt.

When you’re already in the hole, it can feel hard to climb out of debt. Condescending advice like “avoid more lattes” abounds — clearly given from the perspective of someone who hasn’t tried to apply for their first mortgage as interest rates rise along with rents. What you can do is live within your means as best as possible using these tips.

Establish a Cash Payment System

If you sort things out and physically pay for them with cash, for example, by using a cash envelope system, it’s easy to see how you’re always covered. If you have to use your credit card to make the payment (especially if it can earn you a reward), pay off the debt the same day you accrue it.

Stick to Your Budget

Sticking to your budget doesn’t mean denying yourself any fun or pleasure. Make sure you cover the basics, like rent, car payment, utilities, and food. Once that’s taken care of, always have a line item for the fun stuff: you deserve a reasonable amount of entertainment and splurge spending.

Create an Emergency Fund

Emergency funds are blessings on rainy days. Life throws curveballs, and in this metaphor, your carefully balanced budget is a window hit by that curveball. You can avoid major fallout by having an emergency fund. While experts recommend six months’ wages in your emergency fund, start with a more realistic amount, like $500 or $1,000, which is enough to cover many insurance deductibles.

Reduce Monthly Subscriptions

The latest trend for businesses is to sell monthly subscriptions. You have your basics, like Netflix, but also some fun stuff, like makeup and magazines. Take account of your service subscriptions and figure out what you can cut. Maybe you watch Netflix a lot, and Prime Video makes sense because Prime saves you money, but Hulu isn’t one you watch often. If so, you know which one to cut.

Become Captain of Coupons

Couponing is a really fun hobby once you get into it, but even simple couponing practices can save your family major money at the grocery store. Couponing can also be a family friendly activity — if someone wants an extra, ask them to find a coupon for it! Couponing takes even less time through online couponing services like Rakuten, which provides rebates on small and large purchases.

Always Buy Needs, Wait on Wants

Of course, you’ll want to prioritize your needs — but remember, building that savings account is also a need. A useful rule for controlling spending on wants is to wait 24 hours before purchasing anything over $100. If the impulse is still there, consider it. But if it’s faded, put that $100 into your savings instead.

Sticking to a budget is hard, especially if you have multiple people in your household and your income is limited. However, even low-income families can save when they prioritize well. Happy saving!

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