When you have multiple debts weighing you down, it’s easy to get overwhelmed by the pressure of having to pay everything. Some people start to borrow money to pay debt, and the cycle never ends. In order to get out of debt, try the debt stacking method.
What is the debt stacking method?
The debt stacking method refers to listing all your debts and arranging them from highest interest rate to lowest, then paying the minimum amount on all debt except the one with the highest interest which you’ll pay off as much as you can.
For example, you have the following debt:
- Debt A: $1,000 (20% interest)
- Debt B: $2,000 (15% interest)
- Debt C: $10,000 (5% interest)
- Debt D: $500 (2% interest)
Using the debt stacking method, you’ll pay the minimum amounts on all except Debt A which you’ll be paying off as much as possible. When Debt A is fully paid off, repeat the process now paying off Debt B with the next highest interest rate as much as possible each month.
Is it more effective than the debt snowball method?
The debt snowball method is almost the same as the stacking method, however, with the snowball method you pay off the debt from the lowest to highest balance. Which among the two is more efficient really depends on personal preference. In both methods, the effectiveness hinges on sticking to the plan and doing your best to make it work. You can even switch between the two or any other debt payment methods to see which you are most comfortable with and most likely to continue.
Don’t be too hard on yourself whenever you fail. We all know that getting out of debt is difficult regardless of how much you plan. What matters most is that you don’t give up along the way and you learn how to adapt as you go.