How Does the Debt Stacking Strategy Work?


Sorting out your financial affairs is no small feat. For many of us, the very idea of trying to organize your debts can be a substantial headache. However, although it may seem impossible to do, it isn’t. All you have to start off with is finding an appropriate strategy.

This in and of itself may seem rather stressful; there are an abundance of methods to try out. One of the main techniques to implement, on the other hand, is the debt stacking strategy. For all intents and purposes, it works as advertised!

Here is a guide on how the debt stacking strategy works:

What is a debt decking strategy?

The debt stacking strategy involves taking into account the interest accrued on each debt. Also, you should take into consideration the possibility of new debts. This strategy works best when you do not go into further financial straits!

This latter point of not getting into new debt is crucial. Once you know that you want to use the debt stacking strategy, get focused. It is extremely difficult to pay down your debts, if you are constantly getting into newer ones. If you need to, put a hold on your credit cards, for example.

The only time you should be spending out of your budget is when you have available funds. That way, you can place all of your concentration towards working with the debt stacking strategy. After doing this, you can now properly begin tackling all of your debts!

Interest Rate Organization

For the debt stacking strategy to work, start by organizing all of your applicable debts. Specifically, this should start with concentrating on your debts with the highest interest rates. Don’t be swayed by your current interest rate either; this can substantially work against you. You don’t want your debts growing larger after all!

Grab a blank document and organize your debts with the highest interest rates. Place these debts at the top, so that you have a clear view of what to pay down first. For instance, if you have a credit card balance with an abnormal interest rate, focus on this first and foremost. You may also want to prioritize your payday loans accordingly, depending on when you will get your next paycheque.

Debt vs. Spending

Now that you have organized your debts accordingly, grab another blank document. This is where you will strategize how to spend properly. Everyone will have their day-to-day expenses, such as groceries or other bill payments. Your debt stacking method will only work if it is built in tandem with a good spending plan.

Use this document to determine how much money will be allocated towards the most important areas of your life. The more you make this plan detailed, the better your overall blueprint will be for reducing debt. Don’t forget to put some money towards your personal life; you deserve to have fun too!

Minimum Payments

With an entire blueprint now fully realized, you can start on your respective debts. For the debt stacking strategy to work, you must make minimum payments on all debts. After your debt with the highest interest rate has been taken care of, you will now have extra funds.

Use this money towards your other debts, starting with the one with the highest interest rate. This formula will have to be repeated, so long as you have debts to pay off. Remember, getting rid of the debt with the highest interest rate is paramount. This will help to build some much-needed motivation overall.

Paying Off Debts

After a substantial debt has been paid off, don’t just head to the next one immediately. You’ll want to spend some time rewarding yourself, for completing this task. Focusing too much on any debt repayment strategy can be the basis of undue stress. Take some time off; treat yourself to a meal!

As long as you remain consistent in your overall plan, the debt will end up taking care of itself. That is why you shouldn’t feel as if you have to concentrate all the time, once the method is underway. The concept is not difficult to grasp; maintain a sense of consistency and you will remain on track.

Of course, it isn’t viable to stay on the path of debt repayment all of the time. Don’t be too hard on yourself; going over your spending strategy will happen! Or, you might not take care of a debt as soon as you’d think. Stay focused on the big picture, which will help with realigning your concentration.

Paying off your debts is a serious hassle, especially if you have a lot of them. The key here is to both stay organized and to remain level-headed. Your debt stacking strategy will work in time; patience will be your best friend!