Whether it’s because of credits cards, medical expenses, student loans, or a mortgage, many people struggle with debt. Unfortunately, high-interest rates and a lack of income can make it difficult to overcome this burden and regain control of your finances. However, with the right financial planning strategy, it’s not impossible. Debt stacking is one method that has proven successful for numerous consumers looking to get out of debt. When approached correctly, this could end up saving you a significant amount of interest. Below is an overview of how debt stacking works. 

What Is It?

The idea behind debt stacking is to pay down high-interest debts first. To get started, you’ll make a list of all the debt obligations you have, ranking them from the highest interest rate to the lowest. This will show you how to prioritize your debt repayment schedule. 

The process of debt stacking involves making the minimum payments on each of your debt accounts and then taking any extra money you have and putting it towards the debt with the highest interest rate. You’ll continue to do this every month until that debt is paid off. Once you’ve eliminated the debt at the top of your list, you’ll move on to the next one, reducing its balance by making your minimum payment and applying for the minimum payment from the first debt along with your surplus of funds. You’ll repeat this cycle for all of your debts until they’ve been paid off.

How Is It Helpful?

Debt stacking is a powerful financial planning method, as it allows you to accelerate your debt payoff. This repayment schedule not only allows you to attack debt aggressively but also saves you a great deal in interest. When you pay off high-interest debt, you get a return equal to the interest amount you were paying. For example, if you get rid of a card rated at 24.9%, you’ll receive 24.9% back in your pocket.

How Is It Different From Debt Snowballing?

Another popular financial planning strategy is debt snowballing. This method concentrates on paying off debts with the lowest balances first without any consideration for interest rates. Again, you would make the minimum payment on all your debts, but then you’d put your extra money toward the account with the smallest balance. Some people prefer debt snowballing because it offers immediate satisfaction as the debts dwindle down. However, it generally costs much more in interest. 

If you need help managing debt, turn to Primerica to explore different payoff strategies. They can advise you on effective financial planning and help set you up to achieve your economic goals. Based in Atlanta, GA, they offer a variety of debt, investment, and insurance solutions that will allow you to secure a healthy financial future. Call (404) 374-1010 to schedule an appointment, or visit them online to learn more about their services.