Last Updated on May 24, 2021
Budgets can be a tricky thing. The math works if the status quo remains the same. We set aside enough money to cover all our expenses, including monthly credit card payments, and we assume that our income will only change if we get a raise.
Surprise! The 2020 pandemic, though certainly not a predictable occurrence, showed us all that the status quo can change in an instant. Many of us, happily contemplating a debt-free life at the end of the rainbow, suddenly found ourselves making significantly less money.
Be it because of layoffs or furlough, your old budget no longer works and you still need to cover your living expenses, which haven’t gone down. It might make sense to put debt payments on the back burner, but unfortunately that path has consequences. How can you make adjustments to keep paying off credit card debt even when you’re not making as much money?
Tip #1: Reevaluate your spending habits
Rent, mortgage, utilities, car payments, and phone bills are constants. You can change cable providers or cell phone companies to save a few dollars. After that, adjusting your budget comes down to changing your spending habits.
Cook your own meals. Most Americans spend a lot of money on takeout. When the pandemic drove everyone indoors and closed restaurants, we all had to learn how to cook. As the world re-opens, continue that trend. It’s much cheaper to prep meals at home.
Frivolous shopping is another area where you can cut back. Start asking, “Do I really need that item on Amazon?” One-click buying is addictive and easy—stop pushing that button! If you add up all your purchases during a year, you should be able to save several hundred dollars.
Tip #2: Reduce interest payments wherever possible
Every monthly credit card payment is applied to your balance, but the credit card company then charges you an interest rate for the remainder of that balance. You can avoid that by paying the entire balance in full or shopping for a better interest rate.
Apply for a balance transfer credit card with a low intro APR—many cards will give you 0% for 12-18 months. That’s a great way to cut your payments down, as long as you can repay the full balance before your introductory rate expires. Remember, you’re working with less money now, so every penny counts.
Another option is to apply for a debt consolidation loan. These typically have lower interest rates than credit cards and you can stretch your payments out over several years. Plus, many lenders are offering hardship terms right now due to the economic impact of the pandemic.
Tip #3: Don’t take on any new debt
Obviously, a balance transfer card or consolidation loan would classify as new debt, but in both cases, you’re just transferring existing balances. Once you do that, stop using your credit cards. You’ll never get out of debt if you keep piling on new debt.
Instead of paying with credit, use cash or a debit card. You’ll be amazed at how easy it is to monitor your spending when the money is coming out right away—or when you’re physically watching your cash disappear. When you’re on a tight budget, don’t buy anything unless you can afford to pay for it right then and there. You’ll be pleasantly surprised by the result.
You don’t have to suffer a loss of income to implement these suggestions. Cutting back on expenses, lowering interest rates, and paying cash instead of credit are all good habits to get into, regardless of your financial situation. It’s worth a shot, right?