Stacking Debts Away
Getting rid of debt is often thought to be an uncomfortable and overbearing task. One for which, you will most likely need the help of a professional, of course, at a cost! The bad news is, you have debt and yes, it can get uncomfortable at times. However, there is good new. In most cases, you will not have to hire a professional! All you will need to do is buckle down and make financially wise decisions. With that said, below is a simple plan that I like to call Stacking Debts Away.
Stacking Debts Away
Main Objective: This plan is designed to get rid of debts of all kind at an accelerated pace. The main objective in the stacking debts away plan is to attack high interest rate loans first. Thus, allowing you to pay less interest over time and opening capital to pay your lower interest rate debts off extremely quickly once your higher rates are gone!
Steps To Stacking Debts Properly
Step #1: Get A Good Understanding Of What You Owe: The best way to do this is to make a list of all your debts. Your list should include all debts from mortgage to auto loans and credit cards and medical bills. While you create your list, make sure to include all crucial information. You want to make sure you have easy access to things like account numbers, customer service phone numbers, balances and interest rates. Finally, it’s best to order your list from highest interest rate debt to lowest.
Step #2: Come Up With A Constant Payment: If you’ve had a loan or two, chances are, you are used to constant payments. A constant payment is one that does not fluctuate based on your balance. However, as you pay off some loans like credit cards, you will notice that your payment will go down. With that said, as you pay down credit card debt, there will be open funds created to apply to aggressively paying down other debts. During this step, you will need to add up all of your minimum payments. Now, add in all extra funds that you plan to send this month. Finally, commit to this total being your constant payment until your debts are completely paid off.
Step #3: Aggressively Allocating Funds: Now, it’s time to make sure that your highest interest rate debts get paid off first. With that said, you should send minimum payments to just about all of your debts every month. The only debt that you should be sending extra payments to is your highest interest rate debt. Once your highest interest rate account is paid off, you will have plenty of extra funds to really get the ball rolling with your next highest rate account. As you pay off accounts, continue to use the newly available funds to pay off your next highest rate until all of your debts are completely paid off!
A Bit Of Stating The Obvious
An important thing to remember is that you will never be able to completely pay off your debts if you continue to create debt for yourself. Therefore, for this and any other debt relief plan to work, you are going to have to commit to not opening any new lines of credit and not using any outstanding lines of credit until your debts are completely paid off. Keep in mind, emergencies do happen, it’s best to keep a credit card open for emergencies but, remember not to use it unless you have to!
About The Author – Joshua Rodriguez
This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance journalist. Join the discussion about this article or any personal finance topic of your choice on facebook!