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How the Debt Snowflake Method Can Reduce Your Balance, Dollars at a Time

If you haven’t warmed as much as the snowball or avalanche debt payoff strategies, assume smaller. Much smaller.

Consider the debt snowflake technique for tackling debt. Unlike it’s better-known siblings, the snowflake methodology doesn’t contain a structured budgeting system for paying down your debt. However, it additionally doesn’t provide the finish aim — eliminating particular money owed — like snowball and avalanche purpose to do. 

And identical to snowflakes, tiny funds won’t appear to be a lot when tackling a mountain of debt. But after they pile up, your snowflake funds can add as much as a lot of assist. Here’s how.

How Does the Debt Snowflake Method Work?

First, debt snowflake is mainly an offshoot of debt avalanche and debt snowball, two fashionable strategies for tackling debt. Here’s a abstract of these strategies, in case you’re unfamiliar with them:

The avalanche methodology organizes your funds by prioritizing money owed with the highest rates of interest first and placing as a lot cash towards paying off that stability first. It’s the greatest method to save the most cash on curiosity as you’re paying down your debt.
For the snowball methodology, you repay the smallest quantity of debt first, then work your method up by paying off progressively bigger money owed. It’s nice for people who find themselves motivated by small wins as they watch particular person money owed disappear sooner.

Both choices contain creating schedules for making funds and placing any cash towards the focused aim — not a lot with the snowflake. 

Accumulation is the key to creating snowflake work. It requires you to comprehend all the methods it can save you and/or make extra cash every day — above and past your ordinary methods.

Consider this situation: 

On your drive to work, you cease for a jumbo espresso that prices $four. If you downsize to a medium espresso that prices $three, you save $1.

At lunch, you and your coworker head to the deli to purchase $10 subs. By splitting one as a substitute, you’ll add $5 to your snowflake pile.

After work, your neighbor asks should you can babysit her toddler for a couple hours. You contemplate it a favor, however she insists on providing you with $10 in your bother. 

At the finish of the day, you’ve saved/made $16 that you simply instantly pay towards your bank card stability.

Need extra options for piling on the pennies — and ? We have a blizzard’s value of concepts:

Ways to Save Money:

Ways to Make Money:

Does the Snowflake Method Actually Work?

We’re not attempting to drag some snow job on you (such as you didn’t assume I’d go there) — gathering the cash you save by splitting a sandwich just isn’t your fast and simple method to repay $20,000 in scholar mortgage debt.

In truth, the snowflake is more likely to produce such small outcomes that you simply may wish to contemplate it extra of an add-on to your different debt payoff methodology. 

But that doesn’t imply snowflake can’t aid you repay your debt sooner. And should you begin on the lookout for methods to avoid wasting/generate profits every week — yard sale, anybody? — these little snowflake funds can add up quick.

Let’s look at one other instance:

You’re attempting to repay a bank card with a $three,000 stability that’s charging you 17% curiosity and requires a $90 minimal month-to-month cost. Check out the distinction you might make should you might accumulate $100 further by the snowflake technique:

 
Interest fee
Minimum Payment
Monthly Addition to Your Payment
How Many Months It Will Take to Pay Off Balance
Amount of Interest Paid
No Snowflake
17%
$90
-Zero-
46
$1088.88
With Snowflake
17%
$90
100
18
$419.80

Where to Gather Your Snowflakes

You’d save over $670 and shave 28 months of your debt payback timeline. Let it snow!

Here’s the factor about snowflakes: They soften quick. If you’re going to make use of the snowflake methodology, you have to transfer shortly earlier than your micro funds disappear into the abyss of different bills.

So how do you seize them? If you’re utilizing money, you can begin a change jar to gather your financial savings at the finish of the day — simply make sure that to deposit your financial savings into your checking account and use the whole quantity to repay the debt on a common foundation.

If you’re utilizing a debit card, you possibly can switch the quantities into a separate account in actual time.

Pro Tip

Contact your lender to request that it applies your funds towards your principal stability — it can aid you lower your expenses on curiosity and repay your mortgage sooner.

But beware: Plenty of banks have a restrict on the variety of transfers you can also make in a month, and also you don’t wish to watch all of your snowflakes find yourself paying for transaction charges. 

Instead, maintain a operating tally of your financial savings for a specified interval (like each two weeks), then pay the complete quantity at the finish of the interval. Also test together with your lender to make sure that you gained’t get dinged for making a number of funds in a specified interval. 

However you put it aside, do your self a favor and write down the quantity you save every month as a reminder of how a lot these little snowflakes can add up — you should use it for motivation when Uber Eats beckons you.

Less debt? Now that’s cool.

Tiffany Wendeln Connors is a employees author/editor at The Penny Hoarder. Read her bio and different work right here, then catch her on Twitter @TiffanyWendeln.

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