I Asked ChatGPT How To Pay Off Debt on a Fixed Income: Here's What It Said

Dealing with debt on a fixed income can feel daunting. Most know that paying off their liabilities could finally leave some breathing room in their budget, which is especially important when strapped for cash. But even though getting out of debt might be a goal, it's often hard to know where to get started.

With AI tools becoming more prevalent, it's not surprising that more people are turning to ChatGPT for even financial questions. With that in mind, I decided to ask ChatGPT, "How can I pay off debt on a fixed income?" Find out what it had to say.

ChatGPT's first recommendation was to start by writing everything down in one place. "Write down each debt — who you owe, how much, the minimum payment, and the interest rate," it said.

Truth be told, this is a great place to start. If you are beginning your debt-repayment journey, writing everything down on paper or in a spreadsheet can help you see where you stand. With all of the cards on the table, you can move forward strategically.

According to ChatGPT, the most common debt-repayment strategies are the debt avalanche and debt snowball methods.

On one hand, the debt avalanche method involves paying off your loan with the highest interest rate first. From there, you'll roll that minimum payment into an 'avalanche' to use when paying off your loan with the second-highest interest rate. Alternatively, the snowball method prioritizes repayment by loan size, starting with the smallest loan balance.

Both methods are useful choices. Although the debt avalanche method might be more mathematically efficient, the debt snowball method allows for smaller wins in the beginning, which could help you stay the course. Pick an option that works for you and stick to it.

ChatGPT then recommended to "call your credit card companies or loan servicers and explain that you're on a fixed income and trying to pay off your balance responsibly. Ask if they can lower your interest rate or offer a hardship program."

For many, this step might feel intimidating. But if you can lock in a lower interest rate, it may be worth the discomfort.

"If you're juggling several high-interest debts, see if you can combine them into one lower-interest payment," suggested ChatGPT.

Debt consolidation is a useful option for some. Essentially, you'll lump all of your debts into a single payment, which can make managing your repayments easier. It's an especially helpful choice for borrowers with high-interest credit card debt, with a high enough credit score to obtain a personal loan. Personal loans typically come with significantly lower interest rates.

ChatGPT also advised cutting back on recurring bills that you might not actually need. More pointedly, it suggested to "Cancel streaming services you rarely watch, downgrade your cell plan, and ask your utility companies about senior or low-income discounts."

When you are on a fixed income, freeing up even $50 to $100 per month to accelerate your debt repayments could make a significant difference.

If you have relatively high housing costs, ChatGPT also suggested downsizing. "If housing costs eat up more than 30–35% of your income, it might be worth exploring options."

Some ways to potentially lower your housing costs include downsizing to a smaller home, relocating to a more affordable city, or applying for housing assistance. Another option is to rent out extra space in your house, such as spare rooms or storage space in the garage.

If you are having trouble making ends meet with your debts, ChatGPT suggested looking for help covering basic expenses. Specifically, it recommended looking into SNAP for food assistance and LIHEAP for help with energy bills.

Leaning on these programs could give you more leeway to pay down your debt.

When paying off debt on a fixed income, a little bit of extra income can go a long way. ChatGPT pointed out that even a little extra is helpful, saying, "You don't have to start a big side hustle — just something that fits your situation."

If you can, seeking out a way to earn $50 to $100 or more each month could help you pay off your debt faster. Some ideas include babysitting, selling handmade crafts online, or doing online surveys.

ChatGPT recommended setting up some 'no-spend' days in your calendar. "Pick one or two days a week where you commit to spending nothing outside of absolute necessities," it said.

Practicing discipline around spending money can be a great way to reset your spending habits. When you save on those days, consider making small, extra payments to your debt to capitalize on your progress.

"When you get extra money — a tax refund, a birthday gift, or even a rebate — resist the temptation to spend it right away," recommended ChatGPT.

If possible, direct those funds toward debt repayment. This can accelerate your progress without putting too much pressure on your monthly budget.

If you have debt, you aren't alone. The average American has $90,460 in debt. While getting out of it on a fixed income might be a challenge, the good news is that it's definitely possible.

As you make money moves to crush your debt, stay positive and keep making progress one step at a time.