Taking Control of Debt on a Low Income

I get really annoyed seeing articles about how someone eliminated $75,000 in debt, or whatever high amount of debt only to discover this person’s income is in the six figures. Or it’s a couple and at least one of them earns six figures, and more than likely both of them are high income earners. What’s even more annoying is they probably got into debt by over-spending.

How do these type of articles help a single woman who is struggling financially in a minimum wage or slightly better than minimum wage job? You know, never cracking more than $15 or so an hour jobs. We don’t have that six-figure income to fix our debt problem! Most of us are in the low five-figure income.

Us single women don’t have a partner helping out with basic living expenses, saving for retirement, or paying down debt. We have to do it all by ourselves.

We need real advice for real women! Our debt probably didn’t happen because we have wild out of control spending habits.

We probably got into debt because we needed dental work done and had to pay with a credit card.

And then something major happened to our car that needed to be fixed.

Or a big vet bill hit us when our beloved companion got sick or hurt.

Maybe we used a credit card to pay the rent, utility bills, or put gas in the car because our income doesn’t cover all our expenses. Maybe we don’t even have income! We’re unemployed and every day is a struggle to survive. It always seems whenever we might be making a little progress at paying down debt, life kicks us back down again.

Less income means less ability to deal with debt. Lower salaries mean women have more problems saving money and paying down debt.

We’re overwhelmed. We don’t want to open the credit card bills when the mail comes because that means facing the harsh reality. How are we going to make the minimum payment? Paying off the debt in full seems like a fantasy that will never come true.

Spender versus saver

One of the biggest reasons for marriage break ups is due to money issues.

Raises hand!

The deadbeat had out of control spending. He declared bankruptcy shortly after we met in the early nineties. Now you’d think that’d be a big clue to lenders not to give him credit cards, but they stupidly continued to do so.

I wanted to save money. Save for an emergency fund, a new car, a vacation, down payment on house, and for retirement.

In the mid 2000s I’d read Dave Ramsey’s book called The Total Money Makeover. (Disclosure: I’m an Amazon associate and if you click the link and make a purchase, I’ll receive commission for the referral.) By the way if the price below is showing $16.99 – it’s wrong. It’s about $10 on Kindle and $12 for the hardcover. Maybe it’s at your library for free!

I wanted to get our debt under control. The problem is, you need to stop incurring further debt while doing this. He wasn’t onboard with controlling his spending.

We’d been debt free a few times. Including a couple of years earlier when I’d used up half the equity from a house sale to pay off the credit card debt. Two years later it was right back up there.

One day the deadbeat surprised me and gave me his credit cards and told me to cut them up. I didn’t. Instead I put them in an empty margarine container, filled it with water, and put it in the freezer. That worked for quite some time – months! Then one day he must have been hungry and was rooting around in the freezer looking for something to eat. The thing with putting your credit cards on ice is that you can usually defrost them pretty quickly with hot water.

Tackling the Debt Snowball

One of the things Dave Ramsey advises readers in The Total Money Makeover to get out of debt is to use the debt snowball. That means listing all your debt on a worksheet, with the amount owing, and the minimum payment. The lowest credit card (or loan or other debt) is the first listed and the others are listed in order from lowest to highest amount owing. The idea is to make the minimum payment on all the listed debts, but throw as much money as you can at the first debt on the list. Once the credit card with the lowest amount owing is paid off, you add the minimum amount from that to the next credit card and work on paying that off.

Here are better instructions on the debt snowball and paying the card with the lowest amount first. https://www.daveramsey.com/blog/how-the-debt-snowball-method-works

I’ve actually held on to a few worksheets from 2006 and 2007 inside a binder. It looked like in November 2006 I was just starting to list the debts, so maybe I was waiting for statements to arrive in the mail.

Here’s how our joint debt looked on January 12, 2007:

Item	Total Owing	Minimum payment	New payment	Payments remaining
Home Depot	1099.72	13.00	213.00	5
Mastercard	1222.79	100.00		7
Home Depot	2000.00	100.00
Mastercard	7954.59	239.00
Bank loan	11,902.98	248.00
Mastercard	13,960.33	293.16

So that’s around $35,000 in debt. And around $1,000/month just paying the minimum amounts due!

The last worksheet I had is dated July 15, 2007 and here’s how it looked:

Item	Total Owing	Minimum payment	New payment	Payments remaining
Mastercard	6631.33	697.80
Bank loan	10,572.18	248.00
Mastercard	13,263.60	293.16

That looks better! It looks like we’re making improvement. In six months we managed to pay off three credit cards leaving around $30,000 in debt. Remember that interest keeps accruing. Paying off the credit cards with the smaller due amounts is a feeling of accomplishment. It gets the momentum rolling and encourages us that we can tackle the rest of the debt.

One more thing. After writing the above tables, I tossed all those sheets from over 10 years ago! Yay me! Get rid of crap I don’t need! Guess I held on to them all this time just waiting to write this blog post. Yeah, that’s my story and I’m sticking to it!

Grey divorce

The rest of my story – I went through a grey divorce. At the time we broke up, I wasn’t employed. The deadbeat had a handyman repairs type business that I assisted on and that was our income. We’d sold the house but had rented it back on a month to month lease.

There I was with no income and rent due and the bastard had emptied the chequing account with outstanding cheques that hadn’t cleared. His financial irresponsibility helped me with the manager of the credit union. She released a term GIC early (proceeds of the small equity in the house) and I was able to live on that. The joint account was closed (no shit!) and cheques were reissued. It was all so highly inconvenient. Which is how he meant it to be.

I had about $18,000 in debt on two credit cards. Much of that had been just covering the mortgage and living expenses because the deadbeat had become injured and had limited income. I’d been applying for work and hadn’t found a job.

Within the month of splitting up I was lucky to find a six month contract job that brought in a little income. It also brought in a bit of employment insurance when it ended. The deadbeat wasn’t paying support, even with an order in family court.

I also had the responsibility of caring for two dogs and three horses, their expenses I estimated close to $10,000/year, the majority of that in horse boarding fees. And hoping not to have unexpected vet bills.

Credit cards paid off

We look at our debt and hope for an unexpected windfall to help us climb out. An inheritance or winning the lottery sounds good.

The worst thing about getting an inheritance is that someone had to die for it to happen.

In early 2015 my father passed away and towards the end of the year I received a small inheritance as the executor cashed out some financial products. I paid off my credit cards. At least that was a huge weight off my back. I’ve stayed debt free ever since.

Figure out a game plan

OK now that I’m taken care of, let’s help you.

Acknowledge you owe it – you can’t fix what you refuse to admit to. Collect all your credit card statements and balance owing on any other loans including overdraft or line of credit at your financial institution (if you’re using it).

Write down the total amount due, the interest rate, and minimum monthly payment.

Even though I talked about, and used, the debt snowball system above, others prefer to pay off their debt using the debt avalanche system. It’s similar to the debt snowball, except you’re paying off the credit card with the highest interest first. It doesn’t matter the amount owing, it could be the highest amount due on all your debt. The idea is to pay off the debt with the highest interest first because it’s costing you the most amount of money.

Figure out if the debt snowball or the debt avalanche works better for your situation and which one you think will help you stay motivated. You can Google either of these terms for more information and read stories from others on how the one they chose helped their situation.

Whichever way, choose one and tackle only one debt at a time. Pay it off and move on to the next one.

More income and less expenses

It doesn’t matter if you’re trying to find extra money to pay off debt or save for your retirement (or something else), the advice is going to be pretty much the same: figure out how to make more money and trim expenses.

Advice to sell your car and walk or ride a bike isn’t going to work if you’re a single mother or have no public transit in your area, or any other amount of reasons. Same with parking the car for awhile. If you haul kids, groceries, and have to get to work and appointments – you need a car!

Maybe downgrading the car is a realistic option. Can you sell it and buy a cheaper car? One that’s still safe and reliable. Hopefully you did not take out a loan to buy a car. You’ll almost always be upside down on it if you sell it. If you did, add car loan to the debt snowball paperwork.

You’re going to have to make sacrifices in order to kill that debt.

Extra work income

If you have a newer car, consider driving for Uber or Lyft to make extra money. Or deliver food through Uber Eats, Skip the Dishes, or even your local pizza shop.

By the way, Dave Ramsey is huge on delivering pizza in The Total Money Makeover!

Do you have time to take a part-time job?

Find small jobs to help pay off debt. Look on Craigslist under Gigs. This is where you’ll find the part time, one time jobs to pick up extra money.

Is is possible to work overtime at your current job?

Put the extra money toward debt.

Trim expenses

Where can you trim expenses? At least until such a time the debt is paid off.

Eat at home instead of eating out.
Where do you get your hair cut? Are you paying $80 for a shampoo and trim at a high end beauty shop instead of going to a budget clip place?
Buy used instead of new. Clothes, appliances, furniture, car, etc.
Does your bank charge you a fee for just about every little thing? Or a hefty monthly service fee? Sack your bank!

For more ideas on how to save money – no matter what year it is:

Using credit cards to your advantage

Although the idea is to pay off credit card debt, there are times when a credit card can help you. Apply for a credit card with 0 interest (Google that to see who’s offering it). Transfer all your debt to this card and put the push on to pay it off. There is probably a time limit on the 0 interest like six months or a year.

One of your current credit cards may be running a promotion to transfer your balance from other credit cards with a lower interest rate. Check the terms – probably no, or lower, interest for a set number of months.

Your credit card company might have different cards available. When I was carrying a balance on my no-fee Visa at 19.9%, I found out that RBC had a card at 11.9% interest with a $20 annual fee. I took them up on that card. After a year or so of no longer carrying a balance, and rarely using the Visa, a person in the credit card center suggested I switch back to the no-fee card.

Sometimes you can even call your credit card company, explain your situation, and ask for a lower interest to help you repay. If they’re on the edge, throw out you might have to consider bankruptcy if you’re unable to lower payments on all your debts, and they’ll probably be more accommodating. This will only work if you’re current on your payments.

More suggestions

Do you have things you can sell? You can hold a garage sale, sell on Craigslist, or on eBay.

Go to your bank or credit union and ask about a debt consolidation loan. Take in all your credit card statements and ask for a loan to repay them. The bank or credit union’s interest rate is going to be much lower than your credit card interest rate. Plus, now you’re only making one monthly payment to repay the borrowed money. You might have to cut up your credit cards in front of your banker to prove how serious you are about incurring no further debt.

Many provinces and states have a non-profit society that helps residents with credit counseling. They can help you with your options on eliminating debt. Google “non profit credit counseling” with your city and see what comes up. If you can’t find this information, go to the office of the elected official from your town. The staff there probably have that information at their fingertips, or can find it for you.

In Canada, go to the Credit Counselling Society for free help, and they list their locations in BC, Alberta, Saskatchewan, Manitoba and Ontario. There’s a lot of resources that can help people in other locations too.

Try adopting a cash only mentality.

Avoid these things

When you’re trying to pay off your debt, the most important thing is to avoid using your credit cards, or doing anything else to increase your debt.

Avoid payday lenders and their high interest rates. You’ll never escape the cycle.

Don’t take our department store credit cards to tide you over if all your credit cards are maxed out. Their interest rates are outrageous.

Generally, try to avoid using any for-profit services promising to help eliminate debt. Sometimes you just have no choice, especially if you’re delinquent on your payments. If you’re not behind on your payments, their first advice is to stop paying the monthly minimum. After a few months of not paying on your credit card, and being hounded by their collections department, these companies negotiate a lump sum payment in a lower amount than the full balance. You’ll still need to come up with the money to repay the amount agreed upon to wipe out the debt.

A little more help

Once you’ve made a decision to go cash only, try using the envelope system.

Hunh? Say what?

In The Total Money Makeover, Dave Ramsey recommends using envelopes labeled groceries, gas, insurance, etc for your monthly expenses. Fill the envelopes with the money you’ve budgeted. https://www.daveramsey.com/blog/envelope-system-explained

For example, the deadbeat and I had a food envelope and we put $600/month into it. That money was for groceries and eating out. Once the envelope was empty, we couldn’t buy any more food.

We also had an envelope for the Christmas fund. We put in $100, and crossed off that month from the front of the envelope as we filled it. By December we had $1200 cash for all our Christmas shopping.

See Dave Ramsey’s site for useful forms you can print out for free, including the above mentioned snowball debt form.

Now, just so you don’t think I’m a 100% Dave Ramsey fan, all his advice doesn’t work for me. With any financial advice, you take what works for you and reject the rest. I found David Bach‘s financial advice to be less restrictive and more in tune with my financial goals.

David Bach has a series of Finish Rich books that might be good for your situation. Check Amazon. Also check for country specific editions.

Final word

Once you’re out of debt – try to stay out!