How to Get Out of Debt on a Fixed Income

It seems like being in debt is a never-ending battle for me…a debt tug of war, if you will!  Do you feel this way too?  Well, let’s read further and maybe we can all learn a thing or two!



Living on the fixed income is not great – but it can always be worse. Debt is one of the ways living on a fixed income can feel like a living nightmare. But did you ever wonder how to get out of debt on a fixed income and is it even possible?


It is very possible, but it is not going to be easy.


It will take a bit of financial education, adopting better financial habits, and learning a couple of tips and tricks along the way to make the process easier in the long run.


But do not focus on the hard things for now. Try and image living on the fixed income, being debt-free, and possibly with a new income stream that will help you get out of living on a fixed income.


I bet this would feel great – and it is very much possible. It is not going to happen overnight, but it will happen as long as you act.




Down below, you will not only find educational info you will need – but you will also find a basic step-by-step process that will guide you through the process!


Keep on reading, and once you read the article – read it again! Why? Because you are in the right place and if you keep further action – you could really make a change you are desiring.


Not All Debt is Bad Debt


When people think of debt – they think of it in a negative way.


However, not many people know that debt can be used to increase a person’s net worth which then turns out to be a good debt.


But way too many people get in bad debt. The pandemic situation showed us how nothing is certain and how our economic system can change in just weeks.




Going into debt to buy a depreciating asset (such as a brand-new car) is bad debt. You will end up re-paying the debt with an interest and by the point you repay the debt – your car will be worth maybe the half what you have paid for it.


However, here is one great example of good debt.


If you went into debt to make a decent real estate deal and then even used some of the debt to improve the estate – you would end up in good debt.






You would immediately improve the value of the estate by improving it with the debt money – and since most of the real estate prices will increase in the next couple of decades – your property will be worth a lot more than you’ve paid for it when you got into debt.


Bad Debt Can Hurt Your Finances in the Long Run


As you can see from the examples above – bad debt is a double-sided sword where you have no chances to get out of the deal in a positive way.


Living on a fixed income with debt is definitely a bad situation to find yourself in. But knowing that the way you spent the borrowed money will not help your finances, in the long run, is even the worst situation to be in.




Therefore, if you have to get into debt – it is highly recommended to use it to your advantage. And before every debt – you should really re-consider the deal you will end up with, especially in the long run.


Bad debt for someone who is living on fixed income can end up as a nightmare. And when you add inflation on top of that – the odds are definitely stacked up against you.


But Can You Get Out of Debt on a Fixed Income?


Sometimes, the fixed income you receive might not be enough to live, and not even enough to pay off your debt.


Therefore, most people think that it is impossible to repay a debt on a fixed income in time.




However, it is definitely possible with the proper financial education, the right budgeting technique, and with a couple of positive habits.


It is not going to be easy; it is not going to be quick – but if you are persistent and patient, it will eventually happen.


And from there, your finances will be reborn! Keep on reading to find out the steps you need to take and things you need to change to start working on repaying your debt the right way while living on the fixed income.


How to Get Out of Debt on a Fixed Income?


As we have mentioned earlier – getting out of debt while living on a fixed income will not be easy.


It will take a lot of work, time, patience, and proper budgeting techniques along with the right financial knowledge.




But for everyone who is looking for actionable tips on how to get out of debt on a fixed income – keep on reading!


1. Review Your Financial Situation


Even before fixing something, you have to know what is wrong.


Whether you open an Excel file on your computer, or you sit down with a good old pen and paper, you have to review your financial situation in the following way.


Write down your fixed income, and then write down your debt.


When writing down debt, make sure to include:

  • Interest rate
  • Term
  • Monthly payments
  • Available credit limit for each debt


Once you have this written down, you will be able to easily calculate the income-outcome, the rate at what you are spending your income, and what is leftover to work with for the rest of the month.


When you have this written down – the next step is to create a budget.


2. Create a Budget


Some people love budgeting while others hate it. But if you do not know where you are spending all your dollars – it is easy to get side-tracked and spend more than you should each month.




Budgeting is recommended even if you are cautious with your money because you might not be putting your money to work as efficiently as you could.


That is why we are a big fan of a budgeting technique called the Zero-Sum technique.


Even though it sounds extremely complicated – it is remarkably simple in practice.


Zero-Sum technique requires you to spend every dollar of your fixed income wisely, track how you spend your money, and ensure that every dollar has a “job” to do.


This means that your fixed income should result in zero at the end of the month by budgeting your dollars for:

  • Billsperson-pushing-ball-with-bills-written-on-it
  • Spending
  • Investing
  • Re-paying debt
  • Saving


Even though you will have zero dollars left at the end of the month – you will have everything taken care of and everything under control, with a goal of improving your financial situation in the long run.


3. Trim Your Expenses


Reevaluating your financial situation and creating a budget – you might discover that you end up spending or overspending your income on things that are not especially important on a day-to-day basis.


This happens to everyone, even for people who are budgeting. However, it happens the most to people who are not budgeting and tracking their expenses.




Having a look at your biggest expenses is a great way to see where you trim the most. And once you are done trimming – there’s still more work to do.


You can buy food in bulk to lower the food expenses, cut subscriptions, make coffee at home rather than in a coffee shop, and even buy used.


4. Approaching Debt (The Right Way)


Once you have sorted out your finances and your expenses – the debt is still there. However, you are halfway to repaying your debt.


The solid foundation is set and now all you have to do is face your debt and choose which one will you tackle first (if you have more than one debt).


It is important to tackle one debt at a time, but if you have more than one debt – it is as important to choose the right debt as the first one to tackle.


Let us say you have 4 debts. Which one would you repay first?


Spreading your fixed income to cover all 4 debts (by making minimum payments) is something most people would do.


Even though there is nothing wrong with this – there is a bit more efficient way you should know about.


If you have 4 debts – you would want to pay the minimum for three debts. However, for the fourth one – you would want to pay more than the minimum.


This will help you repay this debt first while slowly settling other debts first. Once you repay one debt, do this with the next debt until you repay all debts.


Believe it or not, this technique can help you repay your debt 15% faster than if you just spread the fixed income overall debts equally.


We know that it takes a bit more money – but it is very well worth it in the long run.


5. Switch to Cash


If you did not know this by now – by using cash, you are more aware of your spending and this will help you keep your spending habits under control.


And as we have mentioned earlier, other than the knowledge and the right technique, it is all about personal habits.


Even some of the people with the worst habits can improve their spending by switching to cash, rather than paying everything for by card.



We know that it can be super convenient to swipe the card (or even a smartphone) across the card reader – but using cash will help you keep financial control in the long run.


If you have to use a credit card for online purchases – it is highly recommended to use a debit card instead of a credit card to avoid the tempting yet high-interest-debt-trap.



6. Create Additional Stream of Income


We have all heard people saying – if only I had just a little bit more money.


While everyone loves cash (or money in general), no one is paying attention to the cash flow. Living on the fixed income is not nice for many, and even though it has pretty limited options to increase the income – there are still other ways.


Many people underestimate the internet, and yet the internet can be a great place to create an additional income stream.


This will help you, not only to rely on the fixed income, but also to have a bit more money to cover living expenses, repay your debt faster, or even invest.


If you have browsed through our website, you could notice that we have touched on the subject of making money online quite a lot.


There is a reason for this.


The internet is the most convenient place for people who are living on a fixed income to make money.


And before you even think that you cannot do that – here are three of the easiest ways to make money online:

  • Freelance your skills
  • Find a remote job (part-time or even full-time)iWriter-logo
  • Create your own online business



Another thing we really love about the internet is the number of opportunities. With everything going digital, there are just so many skills you can freelance for others to either supplement your income or even make more than your fixed income.


Finding a remote job is also ideal for people who have a certain skill and would like to continue working. Working remotely is convenient, easy, and very efficient.


Lastly, one of the biggest reasons why we love the internet is because of how simple & easy it is to create your own online business.


Compared to brick & mortar business – creating a business online requires extremely low investment costs and it is far easier & quicker process.


Anyone can create an online business, and even though it is something you should do for long-term results, it requires a lot of work, time, and patience.


And before you say you do not have any skills – here is a great example.


Wealthy Affiliate is an educational platform that combines training on affiliate marketing, tools youWA-logo need to create your own online business, and information you need on how to make progress from there.




Living on a fixed income is not great. But living on a fixed income with debt is even worse.


Knowing that there is a way to reduce your debt and even be debt-free after taking the necessary action is something that should keep you going.


And no matter how much you hate the financial situation you are currently going through – know that you are not alone and that it is something that can be changed.


Reviewing your financial situation, creating a budget, using the mentioned techniques to pay off debt, and working on creating a new stream of income will get you further than you can imagine.


Even if you are not a big fan of the internet, technology, or learning new things – we highly recommend you check out Wealthy Affiliate.


This educational platform is one of the best ones at educating people with no previous skills or experience in the field and yet help them create a new stream of income with the help of a couple of skills and the internet.


What is your biggest problem of repaying debt while living on a fixed income? Did you ever try to learn how to get out of debt on a fixed income before?



Feel free to leave your thoughts, comments, or questions in the comments below and I will do my best to help you out!


All the best,


Founder/Creator:  Living On Lean Means?

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8 thoughts on “How to Get Out of Debt on a Fixed Income”

  1. This article was very informative, I certainly have been in debt and definitely use some of this same principles to dig myself out, with what you’ve shared here, I’ve certainly have a lot more to add to keep myself out of that dark hole, thank you much for sharing this, I’ll certainly share it with others as to help them to climb out that hole.

    1. Hi Earl,
      Thank you for reading and commenting on my article How to Get Out of Debt on a Fixed Income. I certainly appreciate you taking the time. I just wanted to say that I know what you have been through. I have been there a few times myself. It is so easy to get into debt when you are living on a fixed income. We often tend to over use credit when cash is not available to us. Afterwards, it is pretty hard to recover from the debt we have created for ourselves. I created my Living On Lean Means website so that individuals who live on fixed incomes can learn what to do recover from such circumstances.

      All the best,

  2. You have provided several valuable ideas on how to get out of debt on a fixed income as well as pointing out the positive side of good debt such as real estate purchased in a favorable manner. With commitment and effort, it is possible to get out of and stay out of debt. Additional income sources are important as well. I appreciate your thoughts.

    1. Hello Joseph!
      Thank you very much for your thoughts on my article How to Get Out of Debt on a Fixed Income. As stated before, the mission of my website is to provide individuals; such as myself, who live on fixed incomes, the information, tools and tips to help them makes the correct choices when it comes to there money. Developing multiple incomes streams is just one part of it.

      Have a great week!

  3. Hi Barbara!
    Very well said! It is possible to get out of debt with a plan!

    Cutting expenses is key for me!
    And I have a calendar on a white board that has a list of what is due on what day of the month.
    I pay bills this way and also am working off some business debt this way too!

    1. Hi Anne,
      Thank you for stopping by and taking the time to comment on my article on How to Get of of Debt on a Fixed Income. Yes, I do believe that cutting expense is key but also controlling spending is a big factor in getting out of debt on a fixed income. I use a excel spreadsheet to manage my budget and it truly gives me a sense of what needs to get paid when I get paid. I only receive disability income and only receive it at certain times of the month, so I really have to make it stretch until the next month rolls around. Plotting expenses on this spreadsheet really helps me get through each month.

      All the best to you,

  4. Thank you so much for this informational post. Luckily I don’t have any debt, but I believe that if people follow your advice they will soon improve their financial situation. Switching to cash is an excellent idea because you physically see where your money is going. And creating an additional income source, such as an online business is an amazing idea since it can become completely passive once you have set it up.

    1. Hello Delyana,
      Thank you for coming by and commenting on my article How to Get Out of Debt on a Fixed Income. You are probably young enough and one of the lucky ones who do not experience being in debt. But as life goes on, a some point you may experience being in this situation, especially if you are forced to live on a fixed and/or single income. I hope when and if that happens you will keep all the tools and tips I’ve pointed out, at your disposal.

      All the best,

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