Debt is getting harder and harder to get out of. The Federal Reserve Bank of New York’s Household Debt and Credit Report reports that mortgage debt increased by $203 billion in the third quarter of 2021. With so many Americans having to grapple with debt, it is crucial to shed light on the struggles experienced by low-income Americans in the face of debt.
Helping people get out of debt means ensuring that low-income individuals are aware of and have access to the tools they need to manage what they owe and reduce it. These solutions can help low-income individuals and families work towards eliminating debt.
Have the Right Tools to Manage Debt
Debt is especially intimidating when you are not confident you have the resources to pay it off. Fortunately, low-income individuals can make use of these tools to help them stay on the right track when paying off dues.
Stay on top of taxes
Firstly, low-income individuals should understand that they need to take care of their taxes. Neglecting taxes quickly lets them incur two penalties: one for filing taxes late and another for paying them late. The longer these remain unpaid, the higher the interest the penalties gain. Additionally, not filing or paying taxes also means missing out on pending refunds that can lessen the tax burden.
When concerns about the ability to pay taxes come up, they can request an extension to avoid penalties. They can also consult with tax negotiation companies who can discuss installment payment terms with the IRS.
Use finance tracking software
The overwhelming task of getting oneself out of debt can become more digestible when laid out in a visual form. Finance trackers and budget planning apps can do the organizing on the user’s behalf. They have to input the necessary information on the platform.
Finance tracking apps allow people to see a clear picture of their earnings compared to their spending habits. This allows them to find out if another source of income is necessary or when they should cut down on certain expenses, especially non-essentials.
Use solutions specifically targeted towards reducing debt
There are many free tools geared towards helping people cut down debt. Unbury.Me is one such website that calculates existing loans on your behalf and helps devise a payment plan that keeps interest and financial capacity in mind.
There are two methods by which it makes plans: “avalanche” or “snowball.” The “avalanche” method means first focusing on eliminating the debt with the highest interest rate. The “snowball” method, on the other hand, takes care of the debt with the lowest total amount still owed first, then moving on to the second-lowest, and so on.
Know What Support Is Available to Them
Supporting low-income families in the journey towards financial independence is not just about leading them to the right debt management tools. It also involves ensuring they know that they can get various kinds of support from the government and other organizations.
Avail of financial aid for children’s schooling
There are federal and private financial aid programs for students. They come in different forms, such as grants (financial aid that needs no repayment unless academic obligations are not fulfilled) and scholarships (aid that is usually based on specific merits, whether academic or extracurricular). They can also be student loans (borrowed money to finance education that requires repayment later).
For example, special financial aid programs are also available for children or spouses of those in the military. Some students are also allowed to pay off education fees through part-time employment given by the Federal Work-Study program.
Sign up for food, housing, or healthcare assistance
Firstly, the Food and Nutrition Service arm of the USDA has various nutrition programs targeting different age and social groups. One of these is the Supplemental Nutrition Assistance Program, or SNAP, which gives low-income families support to afford healthy food.
For housing, ShelterListings.org has resources for every state on how and where to access low-cost housing. These include information on day shelters, emergency shelters, and affordable housing for low-income people, among other kinds.
If a particular household’s total income falls within a certain amount, they could also qualify for lower health insurance rates. The HealthCare.gov website has a calculator that helps determine this.
Low-income Americans can take advantage of the different kinds of support to help them through the challenges of paying off debt. However, what is first essential is that they understand what these kinds of support are and where they can get them.