As the economic situation in America worsens, many low-income households have no choice but to survive on debt. Worse still, lenders have made debt readily available through various financial products on smartphones.
Combined, all these factors lure many low-income earners into borrowing money and ruining their financial health. To help you stay on the financial straight and narrow, this post shares seven essential tips on avoiding debt on a low income. Ultimately, you’ll see that avoiding debt is within your control, regardless of your financial status.

Live within Your Means

Many low-income earners spend money on items or services they may not necessarily need or afford. You can avoid accumulating debt by cutting nonessential expenses and prioritizing essential needs. Even when your income increases, try to maintain the same lifestyle for a while and save or invest the additional money for more financially secure future.

Create an Emergency Fund

Low-income earners are often unprepared financially in times of crisis, leading many to borrow money to fund unexpected situations. To avoid relying on debt whenever catastrophe strikes, start saving towards an emergency fund. The recommended amount to have in an emergency account is about six months’ worth of essential expenses, but you can save more based on your needs.

Pay Your Monthly Credit Card Balance in Full

The interest charged on overdue credit card balances can get you into deep debt and ruin your financial status. As such, whenever you make a credit card purchase, pay and clear the card balance before the deadline to avoid paying high interest. Early payments also strengthen your credit score over time.

Have a Budget for Monthly Expenses

Having a budget for your monthly expenses, including savings, can help you maintain a positive cash flow in your financial life and avoid debt. When budgeting, the most effective method to use is the 50-30-20 rule, where:

• 50% of your income goes to necessities such as rent and food
• 30% goes to discretionary spending like entertainment or travel
• 20% goes to savings such as 401(k) plans and emergency fund

This way, each of your main financial needs will be catered for without needing extra money from loans.

Tip: Take advantage of budgeting tools available online to help you create an adequate budget.

Limit Credit Card Borrowing

The more credit cards you have, the easier it is to get into debt due to the multiple card charges. You can avoid debt by reducing the number of credit cards you have or consolidating them using credit card balance transfer. You can also use cash to pay expenses when possible to limit credit card usage and overreliance.

Leverage Money-Saving Opportunities

Taking advantage of money-saving opportunities is an excellent way for low-income earners to avoid debt in this tough economy. Therefore, actively look for areas in your budget where you can take advantage of opportunities to save money.
For example, when grocery shopping, many grocers accept coupons that you can use to buy groceries and save cash.

Boost Income Sources

While cutting expenses can help avoid debt, it’s not a bulletproof solution. The surest way to steer clear of debt is to increase your income. Whether by upskilling and getting promoted at work or opening a side hustle, more money allows you to maintain your lifestyle and avoid debt.

Avoiding debt with a low income is a challenging task. Today’s numerous demands and temptations make it easy to get into debt. However, it’s not all impossible. You can avoid debt by budgeting, limiting credit card use, and leveraging various cash-saving opportunities such as rewards and coupons. In the end, having little to no debt helps improve your credit score, which is a considerable measure of financial health today.