Just to clear a few things up.

A number of comments asked where did the extra money come from,to be able to do debt stacking.

When I sit down with clients in their homes and go over their budget, they usually say they are paying extra on each card, because they know, they need and want to pay their ballances down.

My question to them is do you always add the extra payment or just every once in a while?

The numbers I used in the previous post are the most common numbers that my client would give me, who paid extra each month, they were the clients that were trying to get the credit balance down but nothing was happening. They were frustrated. 

That is why debit stacking is so powerful it is not costing you any more, than you are already putting out but it pays the balances off faster and gets you out of debt.

The client who we saved all the interest and had her out of debt quickly, she after 6 months of following the program decided to buy her son a Harley and ended up filling BK. She could not say no to charging and did not have the discipline to stay with the program.

As some have commented it is a discipline and a behavior and I can teach all the best ways of getting out of debt but if you continue to charge, or cut down how much you are paying you lose.

I have a friend who would love to do debt stacking, his wife grew up with parents who always live off the credit cards and she is not willing to change, he is always worried about making minimum payments on lots of cards. Guess what they are teaching their children.

One of the reasons I started Children’s Wealth, is because of all the people who I have helped but did not have the learned disciplines and behaviors needed to deal with money. I believe that we (I) owe our children a fighting chance with learning how money works. If we teach those disciplines and behaviors now along with their parents we are on the right track.

Whenever I  do a class I always invite the parents to join, they are given the same work book as the kids so when they go home they do not have to ask the kids what was that we were taught.

What is Debt Stacking 

Over the years I have taught families the concept of debt stacking. One of my clients was $200,000 in credit card debt owed $100,000 on vehicles’ and had a mortgage of around $300,000. We put the client in a product that took care of debt stacking for them. The results were we got them out of debt including paying off their home in just over 7 years, and saved them $595,ooo.oo in interest charges.

How to debt stack.

Let’s act like we all live in California and we are all in debt. The numbers I will be using were fairly common when I worked with clients. Debt stacking is taught in different ways but I prefer to start with the lowest balance, pay it off and go to the next.

                        Starting Balance             Monthly Pmt                     Actual Pmt                Extra Pmt

Home                  $200,000                   1,200 @6% int                     1200.00                        0

Car                           40,000                      607 @2.99 int 6 yrs            607.00                         0

Car                            15,000                       312 @0% int 6 yrs              312.00                          0

Discover card          9,500                         190                                        300.00                     110.00

Visa                            7,000                         140                                       200.00                        60.00

Master card              5,000                         100                                        150.00                         50.00

Master card               2,500                           50                                        100.00                         50.00

Home Depot              2,000                          40                                         100.00                         60.00

________________________________________________________________________

                              $281,000.00                  $2,639.00                          $2969.00                    $330.00

Let’s start off by adding the $330 extra payment just to the $40 Home Depot and pay $370 to the Home Depot.  $2,000 divided by  $370 = 5.4 months and Home Depot is paid off.

Now take the $370 and the $50 payments to Master Card payment now pay $420.00.

Divide $2,500 by $420 = 5.95 months and the first Master card is paid off.

Following these same steps you can be completely out of debt in approximately 12 years.

Debts stacking only work if you pay extra each month on your accounts and continually do it. Some people teach you to take the largest balance and highest interest and pay it off first. That works also but we like to see results so paying the lower balance first gets us to feel that we have accomplished something.

While you are debt stacking the interest still is added and with what I have shown you it does not take that into the equation, it might take a few months longer to pay things off.

If you charge more on your cards or buy a new car or home, it can be added in but it will lengthen the time until you are debt free.

I got a lot of good comments on my post, How much did Dinner cost? I thought that I would do a little clarification and respond.

1. New laws are out and the credit card companies are required to let you know how long it takes to pay off your card when you make the minimum payment. Remember they are telling you how long for that statement you get each month. Each time you use your credit card the minimum payment goes up and the time of pay off lengthens.

2. Rob brought the point that a credit card is like the casinos giving you chips instead of cash. Why is that? People do not look at the chips and see real money even though it is. It works the same with credit cards.

3. Soyna stated that when she took her step kids shopping and said we are done the kids said there is a ATM let us go and get some more money. Kids think that an ATM is free money.

4. Lisa stated that she had friends that were in debt $10,000 to $30,000 in credit card debt. In Northern California 5 years ago the average person owed $28,000 in credit card debt.

I would have not believed it if I had not sat down with many many couples and the number was dead on. On my next post I will share with you some of the ways to get out of credit card debt and even paying off your home if you want to. That is another post.

4. Robert stated that credit cards are for convenience.

 That is how they are supposed to be used, but we are I want it now society. I have notice that lay away is coming back. Lay away for you younger ones is you go to the store and pick out an item you want then you make payments on it until it is paid for then you get to take it home.

I went to dinner on the other night with my son James and his wife Misty and our granddaughter Olivia. We went to a Japanese restaurant where the chief stood at the grill in front of us and others and prepared our dinner. It was  a lot of fun.

When we finished dinner the hostess came by with our bill, it was $82.00 which was not bad we had dinner, entertainment and good company. I pulled out my wallet and gave her my credit card, when she returned with the receipt I added a tip of $15.00, for the evening it was $97.00.

What is my point.

My point is not to tell you about dinner or even how much it cost, my point is that I put the meal on a Credit Card.

That increased my debt on that credit card. I allways pay off my credit card balances each month, but not everybody does that.

So what I put the meal on a credit card, every one does that. Yes the do, that is not the problem, the problem comes in when you get the credit card bill and it says minimum payment of $20.00 and that’s all you pay.

Wrong

If you do not pay the full amount you have finance charges, they add up fast.

You continue to pay the minimum payment  and you are paying for that meal for months and also have paid as much as double for it. The meal did not cost $97.00 it cost a whole lot more than that.

Where I really want to go with this is how the fast food companies accept  credit cards at the window and how people charge their hamburger, taco, or what ever you get on the card. If our children get a credit card in High School and charge their lunch and are not taught how important it is to only charge what you can pay off each month. Then their is no such thing a Childrenswealth but Childrensdebt and that is a whole different subject.

My question for you is how and what are you teaching your children about the use of credit cards, do you pay the minimum or do you pay them off?  Are you in debit with your credit cards? How can you use this article as a lesson for you and your children, about credit card use and debt? 

When I am  at the Grocery store the question is paper or plastic. I always go the paper route. What am I talking about? Well it is not bags. Paper or plastic is how are you going to pay for the items in the cart.

Old habits are hard to break over ten or fifteen years ago I got an ATM and I used it one time. I still like writing checks marking them down in my check book and balancing my check book. I still carry cash and credit cards.

Some of the other reasons I did not like the ATM   there was and still is  a charge to use it in some places, for checks cash and credit card no charge.

I was at a drive in this week and if I wanted to use my ATM it would cost me an extra $1.50 to buy a milk shake. I just could not justify spending the extra money. At the gas station if you want to use the ATM it cost 45 cents, I think the cost of gas is high enough.

When I talk with people about money and how it works I continue to get the comment that I wish they would have taught me in school how to balance a check book. I believe that it is very important to keep my checkbook balanced, and for me having an ATM, I am sure my plastic would become rubber with out me saving receipts and reconciling later.

OK, I am a Dinosaur when I go with my wife and kids they all pull out the ATM I ask how do you keep track of your spending do you keep the receipts? Sometimes yes other times no but dad all you have to do is go on line and check your balance.

For me I still like writing checks and keeping records. I am sure that the kids are learning in school now how to balance their ATM just as well as the people I talk with telling me I wish they would have at least taught me how to balance a check book.

One final comment where is my cash?