Paying Off Debt When You Make Peanuts

Today we have a guest post from Kara. She’s here to tell you how she’s managing to pay off her debt despite a very low income.

I make almost no money. I made $22,253 this year and will make around $23,000 next year. I have 4 part-time jobs that add up to this sad little number. But I have made it my mission to pay off my student loan balance of $13,291 in the next 14 months.

My story is a simple one: I hate sending money to my debt each month. It’s absolutely maddening to watch chunks of your paycheck disappear into the black hole of debt. Especially since it’s student loan debt. College was supposed to make me money, not suck me dry!

Since I make so little money, each expense stands out. In the last few months I have made drastic life changes and thus I’ve also made major headway on my loans. I am committed to maintaining my dedication throughout 2015. But how much impact can I really make when I make so little money?

It comes down to one thing: knowing when to say ‘no’ and when to say ‘yes’. I say no a LOT of different things.

When my friends go to $16 brunch Sunday morning, I sleep in.

When my family draws names for Secret Santa gifts (you must spend a minimum of $75 on your person!), I opt out.

Any birthday or Christmas money I get doesn’t go to a new dress or a dinner out – it goes to my loans.

Nothing saves you money like simply not spending. And I have turned not spending into an art.

Luckily, free is all around us. I eat left overs from the catering company I work for and don’t spend money on groceries or eating out anymore.

I run and hike outdoors and don’t pay for a gym.

I don’t buy clothes anymore but host clothing swaps with friends.

I attend free events around my city – live music at parks, bars, and event venues are often free during certain hours.

Businesses also frequently host promotional events with free food, drinks and entertainment and you better believe I hit them up.

I can’t remember the last time I went to the mall, and I put myself on a 6 month Target ban.

I walk instead of driving.

I gave up buying drinks at bars or coffee shops, and I haven’t seen a movie in theaters in months.

I also don’t use cash because it’s too easy to spend.

‘No’ has become my mantra.

But I say ‘yes’ to making extra payments on my loans each month. I say ‘yes’ to being debt free!

I have re-allocated the money I used to spend on drinks, clothes, and going out to my loans. In the last three months I have paid off $3,746. I have a $2,000 emergency fund and $900 in regular savings.

I say ‘yes’ to my side hustles and ‘yes’ to being a healthy financial adult. For me, the ‘no’s in my life are not big deals. I can (and am) living happily without my old expenses.

Being debt free is a dream I have been chasing down since I graduated. Finally reaching that goal will taste better than a $16 Sunday brunch ever could!

Kara Perez is a social media worker and writer in Austin, Texas. She writes about women in media and her journey to being debt free at karaelizabethperez.wordpress.com.

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Passive Income Idea: Owning Rental Property

I’ve been thinking a lot lately about how I can increase my income outside of my full-time desk job. The reason I want to build my income from other sources is so I can eventually quit my full-time job. I just don’t enjoy it and can’t imagine spending the next 30 years of my life sitting behind a desk. Plus, I’ve still got debt to pay off and very little savings to rely on if times got tough or I had an emergency. Extra income can be used to help fill all of these voids and more.

I’ve already tried a few different things, like selling products (anyone need any Mary Kay?!), taking on a part-time job on the weekend, cleaning my office building for extra pay, and now freelancing online. I’ve had mixed results with all of these methods. They all have pros and cons. The biggest con to all the things I’ve tried so far is that they all require me to put in time to achieve success.

Outside of money, time is the next most-limited resource I have. It’s hard to find the time and motivation to work on these projects during the evenings and on the weekends when I could/should be doing something fun and catching up on a little R&R or social time with friends.

With that said, I’ve been looking at different ways to increase my income passively, and one of the first things that came to mind is owning property and renting it out for a profit.

Just like the other things I’ve tried, this method of increasing my income would definitely have pros and cons. A pro of owning property is that it could pay the mortgage itself (if you do it right). Plus, you wouldn’t have to put in too much time into managing the property (again, if you do it right), making it a great source of passive income.

Another positive of owning and renting out property is that it is a long-term investment and could gain in value over the years. If you are able to purchase property while you are still fairly young, it could be a great resource to tap into when you get ready to fund your retirement.

One major con for me right now is that I would have to qualify for financing to purchase a rental property and that could be a challenge. It’s not I don’t have a high credit score, I do, but more that my debt to income ratio is quite high and I don’t know if I’d even be comfortable approaching a lender about borrowing the money for purchasing the property.

Another con I’ve considered is that you would likely need to have a separate, or else VERY large, emergency fund to help cover any potential losses or damage to your rental property. Taking on renters is an additional risk beyond living somewhere yourself. You know that you won’t intentionally damage your property, but that same can’t always be said for tenants. Of course, you should always obtain insurance on any property you own and this company is a great one to look at.

For now at least, owning rental property is probably not a viable option for me and my situation. It may be more feasible in the future, and until then I’ll continue to look for other ways to build a passive income to help me reach my goals.

Do you think owning rental property is a good source of (mostly) passive income? What other passive income ideas do you have?

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