Common recommendations for keeping your finances in good order include budgeting and self-restraint. While this may seem to be wise and good-intentioned advice, it is not of much use to those whose income can barely cover essentials like food and shelter.
Many people in the United States, unfortunately, are not paid a wage that makes living with a disposable income possible, and this is one of the reasons why debt issues are so common.
If you are currently in a financial emergency and you have a low income, making sure that you are prioritizing your spending on the right things is, of course, important. But budgeting alone will not solve the problem. The following are some things you can do to improve your situation.
Negotiate with your lenders
If you are struggling to keep up with debt repayments, you may find yourself in a vicious cycle because you will then be subject to unfavorable rates of interest and possible additional charges. In this case, communication is key. Don’t be afraid of your creditors: If you take your time to explain your financial situation and your plan for getting back on track, they will likely be willing to negotiate. They may offer you a break from your repayment obligations for a few months while you get back on top of your finances.
Try to build up an emergency fund
It may sound like a counter-intuitive strategy to try to save while paying off debts, but building up funds in a savings account can give you peace of mind. It will also equip you will a solution in the event of another financial emergency. When saving money, you can start small. Even a spare $5 could be added to your savings account each month. You will be surprised at how quickly small amounts can build up.
Bankruptcy is never an ideal outcome of a financial emergency, but it can help you to wipe away your debts once and for all. Low earners or those who have no income may benefit from Chapter 7 bankruptcy.
Chapter 7 bankruptcy is one of the most popular bankruptcy filings, because it does not require a repayment plan, and it can be completed in a matter of months. It’s a good idea to consider all bankruptcy options before taking action.