First Steps Of The Stack Method
If you’re ready to get out of debt fast, then it might pay off to learn about the Stack Method. It’s all about taking a broad look at your financial situation, deciding on your priorities, and taking the steps necessary to find freedom from debt, one step at a time.
Below are the first few steps of the process.
Step 1: Stop Creating New Debt
Most people do not receive training in handling money and how to live within their means. If you’re in debt then you’re probably one of these people and it’s time to bite the reality bullet. It’s going to be impossible to get out of debt unless you retrain your financial habits right now.
You must make a stand against all the marketers trying to take your hard earned money or offering easy finance. You don’t need more stuff to make you happy. What you need is financial peace of mind.
So cut up your credit cards or freeze them. I mean this literally. Put them in a container of water and stash them in your freezer. Then when there’s an opportunity to spend, you have time to thaw out (you and the credit cards) and really decide if you need that purchase.
Step 2: Rank Your Debt By Interest Rate
Make a list of all your debt with amounts and the interest rate. The highest interest rate should be at the top as this is what you’ll pay off first. Paying off your high interest debt is the key to the Stack Method and paying off debt as fast as possible.
Interest is a powerful weapon and right now the bank or other financial institutions are using it against you. Interest significantly increases the amount you need to pay back and often we’re completely unaware of how much that is.
Step 3: Lower Your Interest Rates
You can often lower your credit card interest rates by doing a balance transfer. This means moving your credit card to another bank and they will lower the interest rate to get your business. Shop around and try to get the lowest interest rate for the longest duration (preferably until it’s paid off completely).
Just make sure you’re reading the terms and conditions carefully so you don’t get stung by the new bank in other ways. Once you’ve done this you can order your list of debt again if things have changed.
Step 4: Create a Strategic Spending Plan
This is where we improve on your financial control from Step 1. Take a piece of paper and write down your income after tax and all the expenses that you have. This will include the minimum payments on all your debt.
Look at your expenses and then rank them in order of importance to you. Look at the items on the bottom of your list and decide whether you’d rather have them or be financially stable. The objective is to create a Strategic Spending Plan where your expenses are lower than your income.
You also want to include in your Strategic Spending Plan as extra amount you’re going to use to pay off debt. Can you afford $20 a week? $50? $100? $200 or more? It’s important that you get a realistic number that you can commit to each week without fail and this is your Stack Repayment.
– via Lifehack
Faster Freedom From Debt
Ready for true financial freedom? Then today is the day to get serious about paying off your debts and putting yourself back in control of your money and your life. Here are a few great places to start.
Pay More Than the Minimum
Make sure that you always pay more than your minimum payments. If you only make your minimum credit card payments each month, it can take forever to pay off your balance. If you want to pay off your balance quickly, pay as much extra as you can afford. Even an extra $50 each month will help. Try using a financial calculator to see how much you can save like this!
Consider Becoming a One Car Household
If your family has two cars, consider getting rid of one and either walking to work, taking transit or car pooling. You can literally save yourself thousands of dollars a year by only using one car.
The average vehicle owner spends over $9,000 per year to own and operate their vehicle. If you use this money to pay down your debt, it will make a huge difference. Instead of going cold turkey and selling your second car right away, test drive this idea first. Try parking your car for a while, dropping the insurance down to pleasure use only and see if taking transit, walking, cycling or car pooling works for you. If you do decide to sell your second car, even the odd taxi trip or rental car won’t amount to nearly as much as you would spend on keeping your second vehicle permanently. If transit is in any way a possibility for you, this option alone is often 80% cheaper than owning and operating a vehicle.
Get a Second Job and Pay Down Your Debt Aggressively
Getting a second job, or consistently picking up an extra shift or two, is a common way for many people to pay down their debt. This doesn’t work for everyone, but if you can make it work, you could be debt free within a short number of years. For this to work, you must apply all of your extra income to debt repayment. Working the extra shifts or hours also doesn’t need to be permanent. Once your debts are paid off, you can look at scaling back again.
You could also consider generating some extra income to pay down your debt by capitalizing on a hobby you enjoy, or a skill set you have. For example, if you’re a good writer, consider freelancing articles for blogs, newspapers, media outlets, or on a freelancer website. If you’re crafty, consider selling your creations on Etsy.
Some people also use their home to generate some extra cash. Is it possible for you to rent out your basement, rent a room in your house (you could do this on Airbnb), rent out the storage space in your garage, or can you take in a student for some extra income?
– via www.nomoredebts.org
How are you changing your life to get out of debt faster?