5 Best Tips to Pay Off Debt With Limited Disposable Income
Living paycheck to paycheck is already hard enough. Couple this with a pile of debt that needs attention, and it seems nearly impossible.
Entering my first year of law school, I was advised not to try and tackle a part-time job as a full-time law student. Unfortunately, I was coming into this new stage in my life with a high, four-figure credit card debt that I racked up during my undergraduate degree. Not to mention, cost of living had been steadily increasing since I graduated. Now, I would be trying to pay for all of my bills, tuition, and living expenses on a fixed government loan.
Living on a low, fixed income aside, this also meant I would be coming out of law school with an insane amount of student loan debt. I laid awake many nights trying to figure out how I was going to afford to live, pay off student loans, AND pay off a credit card bill that was starting to affect my credit score. Low and behold, I hit a breaking point.
I needed to find some way to start paying off my credit card bill while living on a loan that was already meant to pay just for the bare necessities of my life. I scoured the internet, tried multiple debt paying programs and budget sheets, and was hyper critical of every dime earned and spent for the next year.
And guess what? I was able to shave half of my credit card debt down by the end of my first year of law school. With two years left, I felt good about reaching a zero-sum balance before I entered the workforce.
Learn how I did it below!
The 5 best tips for paying off debt with no disposable income:
Determine & focus on which debt you must pay off first
Cut expenses from a pre-planned budget
Participate in easy, online money-making programs for extra cash
Try your hand at a savings challenge with any extra earned money
Track, track, track! Pick a goal, and keep track of money put towards that goal
START COUNTING YOUR PENNIES
1) Determine Which Avenue of Debt is the Most Important (or Scary) & Focus on It
For a lot of people, there isn’t a single source of debt that’s been inducing your frenzied money-anxiety. For me, I was starting this journey with credit card, private loan, and student loan debt.
I originally tried to focus on all of them, paying each one of them down little by little, and never saw any significant progress. I needed to focus all my extra earnings on one, and then turn my sights on the others.
This might not be an option for everyone. Most debt streams always need at least some attention - sometimes you must pay at least a monthly payment in order to not default on a loan or ruin your credit score. By no means does my advice suggest to neglect the minimums of paying back your debts.
However, there are different qualities about different debts that allows you to focus more of your attention on one rather than the other. For example:
My student loan debt was not collecting payments until after I graduated law school. I therefore decided to set early payments on this aside until I felt financially more stable in other areas.
My private loan’s interest rate was extremely low (I got a killer deal). I therefore wasn’t accruing as much interest in waiting to focus on this debt. I still budgeted for minimum payments.
My credit card debt was both impacting my credit score and its interest rates were killing me. I needed to get a handle on this sooner rather than later.
This is just a basic breakdown, but you can kind of see how I was able to hone in on one area of debt and put the majority of my effort into paying it down. In doing this, I was actually seeing a significant decrease on the amount I owed (and the decreased amount of interest I was accruing.) If one category doesn’t stand out to you, or you need more help in analyzing the ins-and-outs of your debts, I would definitely recommend speaking to a financial advisor.
2) Write out a monthly budget and start cutting
Now that we know what debt we are focusing on, it’s time to start finding ways in which to reduce it while not having a lot of disposable income from our main source of income.
The first thing I did was make a VERY detailed monthly budget. For those who have never budgeted before, you might be better served having my favorite budget planner that helps you track everything: expenses, fixed bills, debt, etc.
When I went to budget, I first determined what money I could spend monthly that would last me until my next loan. For others, this might be what your monthly or bi-weekly paychecks add up to.
Then, I laid out my fixed expenses:
Rent or Mortgage
Utilities
Car Insurance Payment/Car Payment
Any Other Insurance Premiums
Subscriptions & Memberships
Etc.
Then, based on the money I had leftover (monthly budget - fixed bills) I determined how much I could spend on non-fixed items (basically everything else I needed to live). Helpful tip: review past bank statements or credit card statements for breakdowns on how much you spent in previous months for a more accurate budget for the following month. This includes looking at money spent on:
Grocery Shopping
Gas
Clothes
Home
Restaurants
Savings
Etc.
Finally, here comes the most important step: cut.
What is an area that you think you could reduce by $20? $50? $75? What area do you want to challenge yourself to not spend as much on as last month? By making these initials cuts (and therefore setting these monthly goals) you can determine early on how much money per month you can save and put towards paying off debt.
For example: I realized in my pre-month budgeting that I was paying for 3 streaming services. For a law student with limited disposable time for entertainment, I decided to cut back to 1. This saved me $25 right off the bat. I also was able to reduce my grocery bill $25 each week (by challenging myself to find coupons, buy off-brand, etc.). This would save me another $100 per month.
These were little cuts I made initially that, when added up, was a big sum of money I could put to paying off my debt.
3) Participate in easy, online money-making programs for extra cash
Now that we have shaved off just as much extra income from our standard earnings as we can, it’s time to make a little extra cash to put towards paying off our debt.
For the busy bees who don’t have the schedule to fit in another part-time job (like me), and only have the time to squeeze in just a few minutes before bed or in-between appointments or classes (again, like me), here are 3 of my favorite side hustles that I did to make a little extra cash:
I can not rave about this site enough. On FreeCash you can earn money for playing games or completing company offers. Unlike other sites that offer this, though, you actually make decent money. I earned a good bit of money playing my FreeCash games while in bed watching my nightly wind-down show. You can cash out your earnings for gift cards, through PayPal, or even get the money sent directly to your bank account. Here’s how much I earned in the first 45 days of trying FreeCash:
Join FreeCash now by clicking here.
Survey Junkie is another way to earn extra money in your free time. You get paid to answer survey questions. While you do actually earn, the surveys are time consuming for sometimes little reward. Definitely a choose-your-survey-wisely kind of deal. Still, it is a mostly mindless activity you could be doing to earn while watching TV or waiting for your next meeting to start.
This one is a bit of a hit or a miss. Sometimes for first time users Robinhood will pay you up to $500 in free stock that you can then sell and cash out. Just need to provide a bank account. Some of my friends have complained though that they claimed this reward and never actually got it… - but I got it!
Also: if you know a lot about stocks, it might be a good idea to take some of the money you just earned (through the extra income channels - don’t be spending money you don’t have!) and re-invest it in stocks to make a larger return. I put in $20 I earned from FreeCash and am now looking to sell the stock for $250.
Of course, there are many other online money-making programs to choose from. A quick Pinterest search is always my go-to for finding more!
4) Start a savings challenge with extra earned income
Now that we have ways to earn a little extra income, we can now spice things up with something that will make you actually want to save it.
For those of you on Tik Tok, you might have seen the viral Savings Challenge Binder. This is a binder where you try to fill out all the pockets with the amount of money listed on them. If you will them all, you’ll have saved $5,050. This is a great way to keep yourself honest with the money you want to use toward your debt, while also having a little fun!
During my first year, I played something similar… while making it a little harder. I only put in money that I earned in addition to my standard income. That is, I didn’t use any of the money that I “cut” to go towards my debt in my early budgeting. Therefore, I was trading in coins I found on the pavement, selling my clothes at Plato’s, and doing anything else I could think of for extra cash. To make it even more challenging (and thus trigger my ultra competitive spirit): I set a deadline to reach the amount I wanted saved — or to fill the binder— and raced against time.
This is a fun way to help stack the extra income to use toward paying off debt! Try your Savings Challenge today!
5) Track! Track! Track!
This last and final trick is simple: track the money you’ve now saved (each and every time you earn something extra) and actually use it to pay off your debt!
Early on, there were often times I found myself with a little extra cash at the end of the month (extra cash I had just worked tirelessly to earn, mind you) and ended up spending it on something I really didn’t need.
NO! While it is great to treat yourself every now and then, it is also important to remember your goal. Paying off debt isn’t easy without a lot of discretionary income — so don’t waste the extra money you did earn!
In Conclusion
Living with debt is hard, and can sometimes be very scary when trying to plan for your future. But this doesn’t mean it is impossible to overcome. Sticking to the 5 tips you’ve learned here today can get you on the fast track to paying off your debt!
Disclaimer: I am not a professional financial consultant. All of the advice given in this post are solely reflections of my own experiences and opinions.
