You may already be familiar with some of the more popular debt payoff strategies like the debt snowball and debt avalanche method. But have you ever heard of the debt snowflake method?
This isn’t just another cute name for what appears to be a winter-themed string of tools for eliminating your outstanding balances. Unlike the two heavyweights that already dominate this space, the debt snowflake method offers something that its predecessors seem to lack: flexibility.
Especially with young people, the debt snowflake is gaining a lot of attention on social media. Here’s what it is and the advantages it can offer over the snowball and avalanche methods.
What is the Debt Snowflake Method?
The debt snowflake method is a paydown strategy that relies on micropayments. The idea is to look for unfounded money – places where you can generate small savings. These “snowflakes” as they’re called then become the micropayments that you can use towards chipping away at any outstanding balances you have.
Much like an actual snowfall, one or two snowflakes won’t make much of a difference. However, the more and more snowflakes that fall, the faster they become a blizzard and begin to accumulate. This is when you start seeing progress made on reducing your debts.
Debt Snowflake Example
Here’s an example of how the debt snowflake method works. Let’s say you regularly eat lunch out every day while you’re in school or at work. Perhaps you order a sandwich together with a drink and chips.
A snowflake could be to:
- Order the sandwich but substitute the drink with a free option like water.
- Skip the chips and just order the sandwich.
- Forego eating out for one or more days altogether and instead bring food from home.
You necessarily won’t bring down the house with those savings. But you technically will have extra money. Therefore, take the savings – no matter how small – and redirect them towards one or more of your debts.
Advantages Over Other Debt Payoff Methods
There are many people who swear by the debt snowball and debt avalanche methods, and for good reasons. These strategies are very effective and can produce results. However, for some, they’re also somewhat cumbersome.
To recap:
- The debt snowball method focuses on eliminating your debts from smallest to largest balance size.
- Similarly, the debt avalanche method targets paying down your debts from the largest interest rate to the smallest.
As systematic and methodical as these approaches can be, they’re certainly not for everyone. Some people may have difficulty organizing their debts or following the rigidity of these rules. Others claim they feel pressured to make too many sacrifices which can lead to feelings of being overwhelmed. When it comes to finances, that’s the last thing someone wants because it means they’ll be more likely to give up on their efforts.
Instead, the debt snowflake takes a much more subtle approach. You are free to tackle your debts in any order or manner you wish. There’s also no pressure to make grand changes to your lifestyle to produce results. Though this may not be the most structured methodology, it does offer the user complete flexibility to operate as they wish.
How to Use the Debt Snowflake Strategy
The debt snowflake strategy is relatively simple to use. You can get started right away by doing the following.
1) Look for Snowflakes
Again, snowflakes can be any number of tiny ways to save or reduce your spending. This can be something as small as ordering a medium coffee instead of a large one, or something as big as downsizing your vacation travel plans this year.
Once you start looking for these money-saving opportunities, you’ll begin to notice them everywhere. For example, you might:
- Skip the popcorn when you go out to the movies
- Buy the generic product instead of the name-brand one at the grocery store
- Forego an appetizer or drinks when you go to a restaurant
Snowflakes can also come in the form of unexpected income. These might be:
- Cash back from your credit card or other rewards program
- A rebate from a recent purchase
- A bonus from your employer
2) Channel Those Savings Towards Your Debts
The next step is to take all those snowflakes you’ve accumulated and put them to work. This is done by taking your savings and making one or more extra payments towards your debts. Get in the habit of doing this once per week or whenever you go through your bills.
It’s important to do this sooner rather than later. When left sitting around in your bank account, there’s a higher probability that you’ll be more likely to spend those extra savings.
Humans tend to have a bad habit of using whatever resources are made available to them. In personal finance, this happens when a person’s spending swells to the limit of how much money they earn or have in their bank account – a phenomenon that’s often referred to as lifestyle creep.
3) Rinse and Repeat
The effectiveness of the debt snowflake strategy is that it’s not a one-time event. Users should be routinely looking for new and creative ways to save money where they can.
Again, these actions don’t need to move mountains. Your goal should be to take each decision and opt for the one that keeps more money in your pocket. You can even make a game out of it by challenging yourself to see how many you can uncover in a week.
If you need some help monitoring your progress, you can sync your bank accounts and credit cards with a budgeting app like Buxfer. Buxfer collects all of your transactions in real-time and summarizes them into one concise report. This enables you to compare your spending week over week and estimate how much extra money you have to put towards your debts.
Pay Debt In Your Own Way
No matter if you plan to use the debt snowflake or another paydown method, what’s important is that you’re doing something to move forward. Taking responsibility for your efforts is always the first step on the journey toward becoming in control of your financial future.
Featured image credit: Pexels
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