Getting out of debt can feel like a heavy weight on your shoulders, and even more so when you’re living on a limited income. So, how to get rid of debt by earning little?
Getting out of debt is absolutely achievable, regardless of your salary.
This guide will equip you with specific strategies to tackle your debt and walk the path towards financial freedom.
Facing Your Debt Head-On
The first step is acknowledging the situation. Debt is a common problem, and it doesn’t reflect poorly on you.
In fact, a report indicated that nearly 40% of the Brazilian population is unable to pay its debts, according to data from the Credit Protection Service (SPC).
Accepting the reality is crucial to take ownership and commit to changing your financial situation.
Getting Organized for the Fight
Now, let’s get organized for the fight. Start by diagnosing your debt:
List Your Debts:
Make a comprehensive list of everything you owe, including credit cards, overdrafts, and personal loans.
Track Interest Rates and Due Dates:
Note down the total amount owed, the interest rates for each debt, and the due dates. This comprehensive picture will help you prioritize your repayments.
Next, take control of your spending:
Create a Budget
How much money do you earn each month, and where is it going? There are many free budgeting apps available, or you can use a simple spreadsheet.
Be honest with yourself and identify areas where you can cut back. Are there daily coffees you can skip in favor of brewing at home? Can you cancel unused subscriptions or negotiate lower rates on your phone and internet bills? Every little bit saved adds up.
Strategies to Save and Increase Income
With a clear understanding of your expenses, you can explore ways to save money and potentially increase your income:
Cut Everyday Costs:
Are there daily coffees you can skip in favor of brewing at home? Can you cancel unused subscriptions or negotiate lower rates on your phone and internet bills? Every little bit saved adds up.
Boost Your Income (If Possible):
The gig economy in Brazil is flourishing, with platforms like Uber and iFood offering flexible work opportunities. You can also explore freelancing websites or look for opportunities to sell items you no longer need.
Conquering Your Debt: Choosing a Repayment Strategy
With a plan to save money, you’re ready to conquer your debt! Here are two popular debt repayment strategies:
Avalanche Method
This method prioritizes paying off debts with the highest interest rates first, ultimately saving you money in the long run.
Snowball Method
This method focuses on paying off the smallest debts first, which can provide a motivational boost as you see debts disappear from your list. Consider your financial situation and personality when choosing a method.
Don’t forget the negotiation! Many Brazilian financial institutions are open to discussing repayment plans or lowering interest rates.
Preventing Future Debt and Building Financial Security
Once you’re free from debt, it’s important to stay that way:
- Use Credit Cards Wisely: Credit cards can be convenient and they also come with a lot of benefits, but use them only for emergencies.
- Develop a Savings Habit: Aim to save for unexpected expenses to avoid new loans.
- Seek Help When Needed: There are free financial counseling organizations available in Brazil, such as the nonprofit Associação Brasileira de Educadores Financeiros (ABEF) which offers educational programs and guidance. Additionally, many banks offer online resources and tools to help you manage your finances.
Remember, financial freedom is a journey, not a destination. There will be setbacks along the way, but with discipline and the right strategies, you can break free from debt and achieve financial peace of mind.
