The stack method is a well-known practice used to resolve debt in the fastest, most efficient way possible. It also helps to have a plan that can be broken down in a way that makes sense.
1. Stop what you are doing, immediately.
If you are reading this and are currently in debt then your spending habits are not working for you, correct? In order to have a different outcome you have to change the way you are doing things starting right this moment. There are basics when it comes to budgeting and If are unsure as to what they are, chances are that is the reason your finances are not where you would like them to be. Figure out the answers to these simple questions to begin to adapt your new spending habits.
How much is your monthly income?
How much are your monthly bills?
How much are your monthly necessities?
How much do you have leftover once you have taken care of all bills and necessities?
When you have answered those 4 simple questions you will know exactly how much money you have, and can create a plan for yourself with the money left over for saving and for spending. This will ensure you take care of what needs to be paid, start a savings account, and never go into debt. What do you do with your existing debt? Move on to step number 2.
2. Stack your bills
The purpose of the stack method is to get rid of debt that is costing you the most money long-term, FIRST. How?
Make the minimum payments on all debts as not to incur further penalties.
Make larger payments on top of the minimum ONLY to the debt with the highest interest rate.
Once the highest interest debt has been paid off entirely, RE-STACK all debts and repeat the process
What is the purpose of this? In order to eliminate your debt in the fastest most cost effective way you have to pay down the most damaging debt first. Once you have done so, you will move on to the debt with the 2nd highest interest rate, do the same until it is paid off and continue down the line until you have no more debts .If you successful ycontinue this method you can move on to step 3.
3. Enjoy a debt free life
As long as you follow steps 1 and 2 you should continue to live a debt free life. When you make a mistake – start again with the process outlined above.
Getting out of debt is as easy as 1,2,3!