Pay Down Debt Faster with the Stack Method

stack method debt Pay Down Debt Faster with the Stack MethodAt the start of every New Year, everyone wants to know how to save more money.  One of the best ways to do it is to stop spending so much of it on credit card debt.  The faster you pay down higher interest credit cards and loans, the better your credit rating will be and the more money you can put away in that retirement account.

Most people don’t intend on getting into credit card debt.  They’re not frivolous spenders who sit on the shopping channel all day or attend every sale there is.  No, more often, most people have gotten into more credit card debt since 2008 – the economy crisis – from a number of reasons that include:

1.  Loss of full-time job, reduction in wages. Many people resorted to paying household bills with credit cards until they could find a replacement job, or even a part-time job to make up for the cut in wages.

2.  Helping kids, parents.  Many people, especially Boomers, helped grown kids, who’d lost their jobs with their monthly bill payments to help them keep their cars and their homes, not have their utilities turned off, and help support their grandkids, etc.

In addition, people have also racked up a lot of credit card debt with just the normal reasons – emergency car repairs, unexpected medical bills, household repairs, etc.  Now that the economy is just starting to pull out of the downturn, it’s time to start thinking of throwing some extra money at that credit card debt to get rid of, or decrease, them.

One of the best ways to do this is using the “stack method”.  It’s a method of paying down/off credit card debt starting with your highest interest rate cards down to your lowest.  Here’s what you need to do to make the stack method work for you:

1.  Stop creating new debt.  Although you may need to do an emergency purchase here and there on a credit card, for the most part, you’ll need to stop using your credit cards.  Take your credit cards out of your wallet/purse and lock them into a box.  Only take them out to use if you absolutely have to.  Some money experts recommend actually freezing them in your freezer.  That way you’ll have to take time to thaw them out to use and in that time you may decide you don’t really need to use them.

2.  Part-time job.  Working even an additional 10 hours a week could help generate extra money to help pay down debt. Take that paycheck and use it for debt only.

3.  List Your Debt.  Rank all your credit cards by interest rates, highest to lowest, making a list of what you owe on each one.  Highest interest rate cards should be at the top of your list as these are the ones you will go after first to pay down.

4.  Create Lower Interest Rates.  If you have room on lower interest credit cards to transfer your higher interest rate balances, or you are able to obtain another credit card with a 0% interest rate for 12-18 months for balance transfers, do so.  The money you save on both the monthly payments and the yearly interest accrued is significant.  Be sure, however, that the new credit card is not going to up its APR to a much higher interest rate at the end of your transfer period.

5.  Get Control of What You Spend.  Make a complete list of every bill you pay every month as well as your yearly/monthly income after taxes.  Are there any services you really don’t need, or could reduce somehow per month? Look at obvious money suckers first – cable TV bundles, mobile phone plans you may not be fully using, expensive gym memberships, daily designer coffee, movies once a week at prime-time, grandkids entertainment, gifts, etc.

Decide which of these you really need to spend your money on then shop around for ways to decrease or omit the others.  For example, if you have a cell phone, do you really need your landline? That could save you $25-30 a month.  Getting a senior discount on your phone plan could knock your bill down to about $20 a month from $40 or more.  A matinee movie for half price saves you about $6.  Decreasing a $30 month gym membership to a $10 one, or $0 to exercise in your home, saves you another 30. Just doing these things has already saved you about $86.00 a month.  This saved amount can be used to pay off credit card debt as noted below with the stack method.

6.  Pay Down With The Stack Method.  You must cover the minimum on all your credit card debts, loans, monthly service bills.  Start with the highest interest credit card, and the money you recouped from your monthly spending (above) then add this extra amount to your minimum payment for that card. Keep up with this method until you’ve paid the entire debt on that highest card.  Then move onto your next highest card and do the same.  In the meantime, try to find more ways to decrease your monthly spending as the opportunities arise.

7.  Reward Yourself.  Choose a reasonable milestone to reward yourself for paying down/off your credit card debt.  Many people wait until they’ve paid off one card then treat themselves, spouse, etc., to a fun night out. You may want to choose a dollar amount of payoff for the reward milestone, say, every $1,000.

Credit has become a necessary evil in our economy.  You can’t get a loan or buy a house or car without it.  Yet, too much credit debt can work against you.  Pay it down/off as soon as possible and gain some much needed peace of mind as well as some extra retirement dollars!

 

http://www.lifehack.org/articles/money/how-pay-off-debt-fast-using-the-stack-method.html

  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method
  • wp socializer sprite mask 32px Pay Down Debt Faster with the Stack Method

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