Debt-Free On a Fixed Income?
Ron asks how a person on a fixed income can become debt-free. Dave offers some thoughts.
QUESTION: Ron on Twitter asks how a person on a fixed income can become debt-free. Dave offers some thoughts.
ANSWER: I think when you say a fixed income, you mean a low fixed income. How does a person on a low income become debt-free? If it were fixed at $100,000 a month, you’d be okay. It’s not the fact that it’s fixed that’s the issue. Fixed income is code for, “I don’t get much income.” The question here is what can we do to get your income up?
If you’re trying to make it on $1,100 a month on Social In-Security and pay off $80,000 in debt, I can’t tell you that mathematically that’s going to happen anytime soon. I don’t have any magic pills here or magic beans I can sell you—no Jack and the Beanstalk here. This has to be a ratio of your shovel to the hole that you’re in. Your shovel is your income; the hole is the amount of debt you’re in. As you have already figured out, apparently, the first thing you have to do is to get your necessities met: food, shelter, clothing, transportation and utilities. Then from there, what are we going to do? Then we can move on and start working our way out of debt.
You may be faced with what you can do to add some income to a fixed-income scenario. That or you’re going to have to look at what you can sell or where you can cut your lifestyle. If it’s a very low fixed income, that may be tough.