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How To Pay Off Debt Fast Using The Stack Method

How To Pay Off Debt Fast Using The Stack Method

Whether it’s consumer debt on credit cards, student loans or a mortgage, most people find themselves weighed down by debt at some point in their lives. This can keep us working jobs we hate just to pay the bills and keep our heads above water. By learning how to pay off debt fast you can release this burden and remove some of the stress from your life.

Today I’m going to show you how to pay off your debt as fast as possible using the Stack Method.

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.

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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.

For example, if you have a $10,000 credit card debt at 20% interest where you pay a minimum payment of $200 a month, you will end up taking 9 years and 8 months to pay off the actual amount of $21,680 including $11,680 in interest!

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.

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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 decide how much you are willing to spend on each area of your life. You can allocate amounts for rent, groceries, eating out, buying clothes and other activities however realize that once you’ve spent your allocated money there’s no dipping into other areas. It also helps to have a Fun Account that you can spend on what you like and an Emergencies Account in case your car breaks down etc.

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.

Step 5: Create a Repayment Schedule

The first part of the Stack Method is to cover the minimum payment on every single debt you have. Any time you miss a payment, you incur fees and these add up quickly. This also includes making the minimum payment on the debt with the highest interest rate.

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Then for the debt with the highest interest rate (your Target Debt) you’re going to add the Stack Repayment from your Strategic Spending Plan. You apply this Stack Repayment and the minimum payment until that debt is paid off in full.

As your official minimum payment decreases you add that extra amount to your Stack Repayment. So as your minimum repayment drops your Stack Repayment increases equally. This will compound how fast you pay off the Target Debt by adding even more to the repayments you’re making.

Step 6: Reward Your Progress

You want to track your Target Debt so you can see your progress along the way. You can also decide on milestones that you’re going to celebrate and reward yourself on. A reward doesn’t have to cost money but if it does then it comes from your previously allocated Strategic Spending Plan.

This is an important step as it will keep your motivation going when you feel your willpower fading. Just like you’ve trained yourself to brush your teeth and shower, you can train yourself to manage your money. Feel great that you’re now entering the 10-,20% of people who are actually responsible with money.

Step 7: Compound Your Results

Once you pay off your Target Debt you have a huge celebration and congratulate yourself. Then you move the Stack Repayment (which includes the previous minimum payment as well now) to the next debt with the highest interest rate. This becomes the new Target Debt and you are using your Stack Repayment amount plus the minimum payment for the new debt.

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This is why the Stack Method is so powerful. As you decrease a debt you actually increase your Stack Repayment amount. This means the second debt will get paid off even faster, the third even faster than that, and so on and so on until you are completely debt free.

Step 8: Be Kind To Yourself

During this process your resolve is going to be tested multiple times. Maybe you’ll have an emergency like your car breaking down or the need to travel for a sick relative. The important thing is to not throw up your hands in despair while going back to your old habits.

Life will test your commitment to your new responsible money attitude and it’s up to you how you respond. When things go wrong (and I guarantee they will) you need to shrug it off and get back on track. Show compassion when you accidentally go over your Strategic Spending Plan and decide to do better next week.

Now You Know How To Pay Off Debt Fast…

The Stack Method is a powerful tool but it’s up to you whether you use it. If you really want results then print out this article immediately and start working through the steps. It’s only by the decision you make right now that you will enjoy a debt free future and live a financially responsible life.

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Published on June 12, 2018

How Much Money Do I Need to Retire? Find Your Answer Here

How Much Money Do I Need to Retire? Find Your Answer Here

It is never too early nor is it ever too late to start planning for retirement. It ultimately depends on your way of life, where are you living, and whether you need to let go of anything. A successful retirement strategy is to have enough pay to cover your expenses with a little cash going into a savings account for sudden financial needs.

With regards to retirement, we all have an alternate vision in mind. In fact, some think about traveling throughout the world, while some think of a peaceful life with their grandchildren. Whether we get ready for it or not, we will one day turn to retirement age and so, we should be prepared for it. I’m going to tell you how in this article.

Benefits of early ventures for retirement

The way this works is you figure out where you need to live, the amount it will cost you to live there (rent/food/transportation), and the various expenses you will need to account for, like travel/insurance/medical bills and taxes. Many people are struggling to put aside money for their future savings and some haven’t started yet. Think you can put off thinking about retirement? The reality is that you need to start thinking about it right now, and putting aside some money from today.

There are a lot of benefits of taking early steps towards retirement. Utilize the power of compounding, low investment for targeted corpus and you can create more corpus investing the same money:

  • If someone saves $100 every month and starts investing for 30 years at 10% return, initially you will see that within 5-10 years, your investments will not multiply. However, after that period, the corpus will increase immensely with the impact of compounding. The investment period expands the extent of profits increments in the corpus.
  • Suppose there are two people, one aged 30, and the other 40. Both need to resign at 60 with the same retirement objectives of $300,000 USD each. Both will put resources into an investment with 10% of the return. Thus, to accomplish their retirement objective, the younger one needs to save $100 USD / month and the older one needs to collect $300 USD / month. Since the older one has started investing ten years later than the younger one, he will pay more than double what the younger one will pay.
  • If someone saves $100 USD every month and starts investing at 30 years old till 60 and gets 10% annual return, his corpus becomes around $170,000. Otherwise, if he starts the same amount spending at 40 years of age with the same 10% return, he will have around $57,000 USD. He can profit by just investing ten years early.

You can’t invest too much money in retirement during the early stage of your career since you may have different objectives. However, you can increase the investment gradually if you start investing just a small amount.

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Average retirement age

For many people who are nearing retirement age or recently resigned, one of their most significant financial regrets is that they did not focus on saving for their golden years. As per the Consumer Reports study, it demonstrates that only 28% of investors with the age of 55 years or older are pleased with the way they have saved for retirement.

As per the report, The Economic Policy Institute breaks down how much Americans have put away.[1] Since you know that when the majority of people retire, you can subtract your age from that more significant number and check down what number of more years you need to work.

But many retirees go back to work. Some of them do part time job while others do seek for a second career. Some even come back to full-time work and then retire again in a couple of years. So deciding their retirement age could be tricky.

Average retirement savings

To get retirement started, saving is pretty easy, though it can seem complicated. These simple five steps will make you go on retirement now. So, you don’t need to stress over having the same regrets as today’s retirees.

1. Invest 15% for your retirement

Your initial step is to save 15% of your income. This will depend on your gross income and does not include any coordinating assets you get through your employer’s retirement plan.

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It’s sufficient to enable you to achieve your retirement investment funds objectives, but not too much to keep you from enjoying your income today.

2. Utilize tax-advantaged retirement plan

Yes, we utilized the T-word; however, don’t daydream! Split your 15% retirement contributing budget between charge conceded retirement plans like your 401(k) or after-tax plans like a Roth IRA.

3. Invest your money around

To put it all in one place is the most significant risk that you can take with your retirement money. With mutual funds, however, you can invest in the biggest and most recognizable brands as well as that new organizations you’ve never known about but has a lot of growth potential.

Opt a growth-stock mutual fund with background marked by solid returns for both your 401(k) and Roth IRA speculations.

4. Stay with it

Since mutual fund investing is less risky than investing in single stocks, it is not risk-free. You can see your savings grow in the long term as long as you can leave your money where it is and keep adding to it.

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5. Work with an investing professional

It is essential to look for an investment professional, as you must have a lot of queries concerning your retirement plan during 30 or more years of investing,

Never make due with an investment professional who recommends or patronizes you to turn over all your investment choices to them. Since this is your retirement, nobody will think or care about it more than you do!

You might analyze or compare your savings against the average retirement savings for your age group to check whether you’re falling behind or getting towards of the curve. On the other hand, it might be conceivable to hang up the work boots and hit the shoreline with fewer savings if you live easily or below your means.

How to achieve your financial goals?

An ideal approach to achieve your financial goals is to stay focused on what you need for your future, ignore everything (and everyone) else that may divert you. There’s a significant business culture out there that requires you to stay in debt, live for the occasion and stress over your future later on.

You need to start planning for your future from now, not when you have more time or money to invest. You can even talk to a financial advisor for any help. Cooperate to set your money goals and make an action plan to reach them. You can retire younger than you thought you could if you create a project and follow up on it.

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Start planning for your retirement

A lot has changed in the last 30 years; our previous generation had an career goal and they would join either a large private company or a government organization immediately after school or college. Then they would spend the next 38 years in the same organization and the form of provident fund and gratuity. They would retire with a decent corpus and they would later spend the remaining time with their pension benefits. It’s a bit different now, but with the above information, you’ll be well prepared.

Whether you can afford to retire now or not, you need not bother with a retirement calculator to get a rough estimate. You should have the capacity to closely approximate your daily spending habits to figure out how much money goes out the door every year.

Featured photo credit: Pexels via pexels.com

Reference

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