Increasing Your Income to Payoff Debt

by Kevin on April 8, 2013

There’s no doubt about it, increasing your income to payoff debt can make the whole process…painful. It means having to do something that requires that you step out of your routine. You will probably have to leave your home and take on new responsibilities.

But if you’re in debt, especially if you’re deep in debt, increasing your income may be the only way that you can get your debt situation under control.

Why simply living more frugally won’t do it

The first thing that usually comes to people’s minds when they think about paying off debt, is cutting living expenses. This can help – you are redirecting money from various expenses into debt payment. And if done religiously, over a sufficient period of time, it may be all you need to do.

But frugality has its limitations, especially where comes to paying off debt. Often, after parsing through your budget, you find 80% to 90% of your expenses are of the large, fixed variety. This can include the house payment, one or more car loans, student loan debts, insurance and even certain utilities. Those payments will be extremely difficult to cut, forcing you to find savings somewhere in the remaining 10% to 20% of your budget.

A lot of people are simply too tightly stretched on their budget – that’s why they’re in debt and the first place. Most of the regular income is eaten up by major expenses, there’s just no room to find the money to pay down debt. In addition, when you’re trying to cut the thinnest part of your budget, those cuts can be painful. It might include making radical reductions in your grocery bill, your entertainment budget, or even school related expenses for your children.

While you might be able to use that strategy for a few months, if paying off your debts will take several years, there’s an excellent chance that you will tire of the fight and simply give up and go back to your old ways.

Combining income and frugality

For most people, cutting expenses won’t be enough to payoff debt. You’ll have to take a look at the income side of your budget and see where you can find increases.

As we said in the opening, this is generally more difficult to do than cutting expenses. You may have to make wholesale changes in your routine and even in your life in order to make it happen. But if your debts are high enough, and will take a long time to pay them off, getting money from the income side will be absolutely necessary.

That’s not a bad thing either. The combination of increasing your income and cutting back on your expenses will be just the formula that you will need in order to pay down and finally payoff your debts in the shortest amount of time possible. This is extremely important because time is a factor in paying off debts. You may be able to carry the fight for a year, a year and a half, or maybe even two years. But as you get much beyond that, the will has a way of breaking down, and life has a knack for getting in the way.

How can you increase your income?

If you decide that increasing your income needs to be a part of your debt payoff strategy that leaves the question, what do I do to earn the extra income that I need? Sometimes the answer to this question is pretty easy; other times it requires more radical action. Consider one or more of following:

Sell off some possessions. This might involve more than gathering up unused items from your house and selling them at a garage sale. It could involve something much larger, such as selling off vacation property, a second or third car, a recreational vehicle, or even one or two rooms of furniture. There’s real potential here to raise thousands of dollars, so you may have to make a choice between having these extra luxuries and paying off debt. It comes down to the question will the possession(s) or paying off our debts have a greater positive impact?

Get a part-time job. This is generally the most intrusive way to increase your income. You have to keep a certain number of hours, work at a fixed rate of pay, be supervised by others and work at a remote location. If you already have a full-time job or business, this can be a tough juggling act. But if you make just a few hundred dollars per month at the part-time job, it’s a way to really fast forward your debt payoff efforts. If you can think of it as a temporary venture, with a very specific goal ( becoming debt-free), it will make the whole arrangement easier to tolerate.

Start a side business. Most of us have at least something of an entrepreneurial streak in us, and we’re often daring ourselves to bring it out. Becoming debt free could provide all the motivation you need to do what it is you know you want to do anyway. What kind of business idea have you tossed around in the past? Maybe now it’s time to get serious about it, and make it happen.

If you don’t have an idea, think about the skills that you do have and how you might be able to turn those into a profitable side business. Think about any subject you might be able to tutor, any repairs you’re capable of doing or even any kind of clerical work. Check the web and see whether there may be niches for those skills, then get busy at converting it into a business.

Special projects. Give some consideration to taking on a major project at work or outside of it. Is there a project at work that needs to be done for which the staff is not available? Talk to your boss about taking on the project yourself. You can do it for a flat fee, an hourly rate, or any arrangement is mutually agreeable.

You can also see about projects outside of work. Is there someone in the neighborhood that needs to have their house redecorated, painted, or have significant lawn work done? Is there someone in your community who needs help with some sort of work? Take a look in the classified section of the local newspaper, or on Craigslist and see what kind of projects people are looking to have done. If you have the skills to do the work, you may want to take the project on and make a few hundred dollars – or even a couple thousand – in a relatively short amount of time.

You can attempt to payoff your debts strictly by cutting expenses and applying the difference to your debt. But if you can add an additional income source to the mix, the payoff will occur so much quicker. The faster debt payoff happens, the more likely it will be will happen.

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