Managing finances while in debt is a difficult job. But, you have no other option other than paying it off and managing finances at the same time.
Today I’m going to guide you how to pay back debt with the help of debt stacking method (commonly known as the debt avalanche method).
Have a look:
1. Don’t make new debts
Most people are ignorant about how to handle finances and stay within their means. As a result, they land up in debt. If you’re one of them, the first thing you should do is stop gathering new debts. Otherwise, you won’t be able to come out of debt ever.
You must remember that you need a peace of mind to manage your finances better which is possible when you stop acquiring fresh debts.
2. Arrange debts by interest rates
Be careful! As banks and other financial institutions are using interest rate to squeeze money from you.
This process will continue as long as you don’t pay off all the outstanding balances. As you are paying the highest interest debt first, this stacking method helps you save more dollars on interests and repay dues faster.
3. Reduce interest rate
Since interests eat up most of your money try to lower them as much as you can.
Make sure to read the fine prints carefully so as to avoid any financial hassles later.
4. Make a strategic spending plan
This part is the heart of our financial torso where we have the chance for improvement. Having a weak researched spending plan won’t spare your finances. Your objective should be to lower your expenses than your income so that you have more dollars to pay off dues.
Do it strategically and find places to cut down costs to free up funds for satisfying your dues.
5. Create a repayment plan
Whenever you miss the minimum payment on each debt and the payment on your high-interest rate account, fees start incurring quickly. It increases the amount you have to pay in order to become debt free completely.
6. Reward your progress
Keep track of your Target Debt to check your progress. Once you cross a milestone celebrate or reward yourself. Though you don’t always need money to celebrate but if it does it’ll come from your strategic spending plan.
7. Compound your results
Once you have paid off your Target Account move the stack repayment to the next highest-interest debt which becomes your new Target Debt.
Hence, your dues will be paid faster.
8. Stay determined and don’t give up
When you are religiously trying to settle your dues life will test your patience and commitment time and again. You may have to deal with an emergency situation suddenly. This may force you to adopt your old financial habits.
Whenever you face such situations never give up what you’re doing. Instead, stay firm on your decision to become debt free.
What does your debt payback plan looks like? Do share with us.