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How to Pay Off Debt on a Single Income

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Carrie SmithGuest Blogger
December 27, 2016 · 2.1k Views

Whether you’re a single person, or simply a one-income household, paying off debt with a single income is difficult. The good news though, is that it’s not impossible. You just have to readjust your financial mindset so you can craft a plan that will work for a single income. Most debt advice and strategies are geared towards everyone working towards paying off the debt. But this isn’t realistic when there’s not a dual income. Here’s how to pay off debt when you only have one income source.


1. Choose a realistic debt payoff method

debt payoff methods

Source: Debt Consolidation

The first step is to choose a realistic debt payoff method, one that will work for you and your unique situation. It’s all well-and-good to want to pay off your debts in 6 or 12 months, but that could cause more financial harm than good.

You don’t want to pay off your debts so aggressively that you end in more debt than when you started. That’s the problem with crash diets, you starve yourself to the point of binging and you end up putting on more weight in the end. The same principal applies to choosing a realistic debt plan.

There are three main ways you can pay off debt that have been proven to work really well.

  • Debt Snowball - List your debts lowest to highest balance and tackle the one with the lowest balance first. Pay the minimum payment on all your debts except the lowest balance one, where you put all your extra funds towards it -- thus, creating a snowball effect. Continue until all your debts are paid.

  • Debt Avalanche - Focus on paying off debts with the highest interest first, instead of organizing them by lowest to highest balance. Use the snowball effect to continue paying the minimum payment on all your accounts except the one with the highest interest rate, which you’ll pay off as quickly as possible.

  • Debt Snowflake - This strategy focuses on paying off debt with extremely small chunks of money, even just $10 or $20 at a time. These micro-sized debt payments are made more frequently, even several times per month, instead of just one large monthly payment. Continue covering at least the minimum payment on all your accounts till your debts are paid.

I personally recommend using the Debt Snowflake method until you’re able to afford to pay off your debt in larger chunks. That way you’re still making progress, even if it is very small, and establishing smart financial habits along the way.


2. Track your expenses with a spending plan

spending plan

Source: The Balance

It’s hard to create a budget and even more difficult to actually stick to one. I get it. Budgets are not fun and seem to be more restrictive than freeing. So instead of spending a lot of time creating a new budget, start tracking your expenses at the end of each month. Don’t worry about your budget. Focus on the idea of tracking your purchases with a spending plan instead.

Traditional budgets are flawed because they focus on creating categories for things you may never even use. I mean, do you really need an entertainment budget if you never go to the movies? And you don’t need a car fund if you don’t own a vehicle.

A spending plan, on the other hand, allows you to spend money based on your personal goals and values. Grab a planner and start recording all of your purchases every day, or list these out on a small notebook or journal. At the end of the month, add up all your expenses and see how they stack up. This will help you create a more mindful spending habit, versus just restricting everything from a budget.


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3. Reduce your interest rates

reduce interest rates

Source: US News

Let’s face it, the lower your interest rate is on your credit card or auto loan, the faster you’ll be able to pay it off. One way to help reduce your debt load quickly is to negotiate a better interest rate or even refinance your loan into a new one.

Call up the customer service department at your credit card, or loan, financial institution and ask about your options. How can you reduce your interest rate? What refinance options are available for your account?

Most customer service reps will work with you and help you get a decent rate. They’d much rather make sure you’re happy than to lose your account as a customer. By simply asking about your options and negotiating a lower interest rate, you can help reduce your debts this month.


4. Focus on earning more

focus on earning more

Source: Health Coach Solutions

The reality of having a single income is that you can only cut back your spending by so much. There are necessary sacrifices that you’ll have to make, but don’t focus on those. Instead, spend your time and effort striving to increase your income as much as possible. You really want to maximize that single income as much as possible.

Obviously your time is limited, but there are things you can start doing now to earn more money. Start with your day job, can you negotiate a higher raise? Or perhaps work less hours so you can dedicate time to another part-time or weekend job? Can you start freelancing at night or during your spare time?


These money-making ideas are to help in the short-term as you get a jumpstart on paying off debt. As you get a better financial footing you can scale back the amount of hours you work and try refinancing your loans again once your credit is better. Every little bit helps when it comes to paying off debt on a single income.

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carefulcents profile picture
Hi, I'm Carrie Smith! I'm a financial writer and small business expert who helps freelancers build client-based businesses through meaningful relationships. I have a background in small business accounting and taxes and recently won an award for Best Entrepreneurship Blog for my site, carefulcents.com.

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