How to Get Out of Debt on a Fast Track

There are different ways out of debt, but the Stack Method (or Fast Track Fund) is among the most effective. Here is how to get out of debt within a reasonable amount of time. In fact, it's been said that no matter how much debt you have, if you could faithfully apply this plan, you could expect to be free in 5 years. That may seem like a long time, but the time is going to pass anyway, so why not get out of debt while it happens?

What's the alternative? Why not commit and start setting goals now? It's time to break free!

Ways of getting out of debt

Search the web and you will find all kinds of ideas for getting out of debt. The first step for any of them is to STOP CREATING MORE DEBT. It's time to get serious. Put away the credit cards, and maybe switch to debit cards. You can only spend what you have on a debit card.

Don't take on any new debt. This may mean self-discipline. It may mean cutting back on some luxuries. Hey, if you get through the next 5 years with hard work, then you will have that much more money to use and enjoy some more luxuries. Only you won't be in bondage to the debt.

Now that you've cut off any new debt possibilities, you could get drastic and sell things, like your second car. You could talk to credit counselors. You could perhaps cash in your life insurance policy, or refinance your mortgage. Then there's bankruptcy.

I'm hoping that you don't need to do any of that. With the method shown here, you shouldn't have to. Yet please do consider cutbacks in your spending habits. You don't need to go to the movies every week. You really don't need cable or satellite TV. At least not the full blown plans.



Stop using credit cards like Monopoly money. Unless you can pay off the full balance each month, you lose so much money in the interest that's added otherwise.

Be free in 5 years

DISCLAIMER: 5 years is a ballpark figure. It could be more, it could be less. It should be possible if your fast track fund is 10% of your monthly income.

Here's how it works: Let's say you are currently making monthly payments on five different items: credit card bills, car payments, house payments, etc. Each month you are making the minimum payments.

The minimum payments may look like this:

• $30 for credit card
• $200 for car
• $1800 for home
• $50 for washing machine purchase
• $300 for second car

The goal is to continue minimum payments on all but one account. That will be your target debt. You will pay more than the minimum on your target debt with special money you have set aside.

Business instructor Paul Milligan calls it the Fast Track Fund. The Fast Track Fund is what you will set aside out of your monthly income. 10% would be great, but if you could manage to save more, even better. If you can't manage 10%, do as much as you can. But try to be consistent.

So if monthly income is $3000, you would put $300 (which is 10%) toward your Fast  Track Fund. Every month you will set aside this amount for debt elimination.

Again, you may have to make some cutbacks in the way you live. Be brave, be diligent, and purchase less entertainment! Get creative about things you can do without.  Do you really need to buy expensive sodas every day? Maybe you could settle for McDonalds' coffee instead of Starbucks.

The snowball effect in your favor

Now look at your debts again. Arrange them in the order of the smallest to the greatest. You will continue making the minimum payments on each one, except for the easiest debt. That one you will target to pay off first.

Why the easiest debt first? You will build confidence when it is paid off, and be more motivated to keep going.

Lets say your credit card is your smallest debt, and it's up to $990. The minimum payment is $30.  You are still paying all minimum payments. But here you will:

Use your Fast Track Fund, $300, PLUS the $30 minimum, paying $330.

• Next month the visa bill minimum may be lower because you have reduced your balance. But don't do the reduced minimum payment. From here on you keep paying $330.
• In three months the balance should be paid off. End of debt!

With that debt paid off, you now have $330 to apply to the next debt, now the smallest on your list.  Let's say the washing machine with a minimum $50 payment.

• Add the $330 to the $50 minimum, and now pay $380 each month until the machine is paid off.

Once that's paid off, you now have $380 in your Fast Track Fund to use on the next debt.  Don't forget to add that debt's minimum payment to it. Then keep consistent.

Every time you pay off one debt, the Fast Track Fund gets bigger because you are adding minimum payments to it. In most cases, 5 to 7 years is all it takes to get rid of all debt, including the mortgage.

"How can that be?" It's because of the cumulative effect. The amount you can work with is increasing while your debts are lowering.

Sounds pretty good, eh? Granted, life happens. Emergencies come up. But if you can stay for the most part consistent with this plan, it will produce results.

Once you have eliminated all debts, then use that expanded Fast Track Fund to build into some savings. Don't just start spending again. Be wise with your money. It's a good idea to establish an emergency fund, ideally covering 6 months worth of expenses.

What are some other ideas? Have you had success getting out of debt? Leave your comments below!