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Pay-off debt when you live paycheck to paycheck?

May 31, 2018

You're in debt and you want to pay it off but often reality tears down the best plans and rips-up your resolutions. For many Americans, despite talk of a roaring economy, expenses still stretch budgets and drain savings. The statistics from last year's Harris poll on behalf of Careerbuilder are grim: (See full article

 

- 78 percent of U.S. workers live paycheck to paycheck to make ends meet

- Nearly one in 10 workers making $100,000+ live paycheck to paycheck

- More than 1 in 4 workers do not set aside any savings each month

- Nearly 3 in 4 workers say they are in debt today - more than half think they will always be

- Over 50% of minimum wage workers say they work more than one job to make ends meet

 

What does this mean for you if you are among the indebted who wants to shake off the shackles? Is it even feasible to pay down your debts? It's going to involve making some tough choices to cut back expenses or to supplement the paycheck with a profitable side-gig.

 

The economy is strong and companies are having a tough time finding talented workers with a decades low in the unemployment rate. Workers scarred by the last recession are not asking for raises companies might be willing to give, if pressed. They have also been less willing, compared to in past economic recoveries, to make moves to improve salaries - mobility has stalled, even as unemployment shrank (LA Times). Turning the corner in your personal finances might mean getting bolder while the timing is on your side.

 

Say you do get up the gumption to ask for that raise so that you have some cash coming in above and beyond your minimum payments - now what? We asked Douglas Boneparth, author and leading money manager who works with up-and-coming New York City Millenials (you think some of them carry hefty school debt?) how he advises his clients to think about paying off debts or starting to invest and build a portfolio. Stay tuned for some great Q&A!

 

<=  click on the picture to Buy the book if you're too eager to wait! 

 

Another way to turn the corner: beating down the interest rate on your debt... We're going to consider a different approach for making your earning have a fighting chance to chip away at the growing wall of debt. If you can refinance your debts to save on the interest expense that adds up each month, then you could have a bigger portion of your payments go towards lowering the balance. Instead of running in place, you'll be making financial headway. 

 

How to choose the best credit card consolidation loan or refinancing option for you?

 

Our friends at Reviews.com have thoroughly researched the consolidation loan options and have identified which might be right for you depending on your credit score.

 

Pro Tip: please make sure you're keeping up with minimum payments! A stamp costs 49 cents, but late fees range from $25 to $35 plus a few points off your credit rating - which will limit your refinancing options too.

 

Without further delay, the low-down on who you should consider for your consolidation loan:

 

The Best Debt Consolidation Loans

  • Prosper - Best for Average Credit

  • Marcus by Goldman Sachs - Best for Average Credit

  • Lending Club - Best for Average Credit

  • SoFi - Best for Excellent Credit

  • Upgrade - Best for Poor Credit

  • Avant - Best for Poor Credit

If you would like to read more about how Reviews.com came up with these recommendations, you can find the full report here.

 

 

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We also talked to our friend, blogger Mohammed Mulla, currently on a "mini retirement" in the Philippines, living it up while cutting expenses: "I would give some old fashioned advice. In terms of day to day spending one shouldn't spend what they don't have, therefore there shouldn't be any debt." So there you have it, live within your means to the extent possible to avoid debt in the first place. Question the need for perceived necessities and make that paycheck go further towards your goals and living the best life available.

 

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