Snowflaking is a powerful technique used in personal finance for becoming debt-free. From what I could find, this was first written about by Jaimie at I’ve Paid for This Twice Already. In her primer on the topic, Jaimie explains that snowflaking is taking little bits of money that is collected over a month and applying it to pay off your debt. Of course, in order to get any traction, this technique has to be used in conjunction with an overall plan for becoming debt-free.
The plan that I and many others have used to become debt-free is covered in detail in Dave Ramsey’s book, “The Total Money Makeover”. I won’t go into the details of Dave’s plan here, but if you are not familiar with it, I would highly recommend learning more. Here’s where you can find a good review of the book and Dave’s baby steps for getting control of your money and building wealth. Another great resource that provides additional details is at Gather Little By Little called 6 Ways to kick off your personal finance new year the right way. Trust me, it doesn’t have to be January 1st to start making improvements in your financial life. The best time to start is now.
How to get started snowflaking to reduce your debt.
One of the real beauties of any truly effective technique is its simplicity. Snowflaking is very simple, but also very productive. You just take any extra money that you can save or earn over the course of a month and then add it to what you are already paying towards your debt. As Jaimie explains in her Five Golden Rules For Snowflaking, no amount is too small to be consider a useful snowflake. When you do this, it is truly amazing at how much you can accumulate and the impact it has toward your debt reduction effort.
Still confused about where you’re going to find any extra money to use as snowflakes? Let me share my story to help open your mind to the possibilities. When my wife and I started trying to pay off our debt, I honestly didn’t think we had anything beyond spare change to throw at it. However, by working diligently and refining our budget over the course of several months, we came up with over $500 per month. We did this by snowflaking together several small sums of money. We did it by going to level-pay or averaging on our utility bills, reducing our cable TV services, using a prepaid mobile phone, shopping for cheaper car and home owner’s insurance, and cutting back on eating out just to name a few things. These things really add up. We also had a garage sale and used things like bonuses, rebate checks, and tax refunds as snowflakes.
There are literally hundreds of ways to find and gather these small sums of money. In fact, at Finance Gets Personal there is an excellent article titled Snowflaking- 100 Ways to Come Up With More Money for Your Debt Snowball. Here you will find a ton of very creative ideas that will have you paying off debt faster than a snowball melts in…you get the idea! If you are still hungry for more ideas to get out of debt faster, then check out Lynnae’s article titled Finding Snowflakes to Add to Your Snowball at beingfrugal.net. She combines her frugality with snowflaking to speed up the process even further.
Of course, snowflakes don’t have to be small. At MommyGetsPaid, there is a great story about how they are using a huge tax refund of over $12,000 to pay down their mortgage. The approach they have chosen to take is very interesting. Rather than put the whole $12,000 toward the mortgage at once, they have invested it in a high interest money market account. They are then paying an extra $1000 per month from that account to their mortgage while the principal earns interest.
The impact of snowflaking revealed.
Personally, by using snowflaking to build my debt snowball, my wife and I were able to pay off $28,000 of debt in about 20 months! ~Jeff
You should find this encouraging. Snowflaking by its very nature has a cumulative effect. It starts small and builds to big results. We didn’t really do or sell anything big. We were just focused and used whatever we could save or earn to pay down the debt no matter how large or small a sum it was. It really is an effective technique. Consistency is one of the most important things to make this really work.
So, what have others done? FrugalDad explains how he set up a second checking account for collecting his snowflakes which resulted in an extra $66.02 in debt reduction the first month. This sum may not seem large and it’s not really, but when you do this consistently you will be amazed at the impact it has. In another example, Shanti at Antishay Ventenne collected $247 in a month by selling some stuff on eBay, half.com, Amazon.com, and craigslist. She expects that her snowflaking efforts will allow her to pay off the remaining $3,000 she owes in one and a half to two months!
Finally, let’s look at the results achieved by Jaimie that first wrote about using snowflaking to pay off debt. What has she accomplished? According to her current numbers, she has paid off a whopping $11,388.48 since last June! That is an average of over $1200 per month that she has reduced her debt. Obviously, this technique works!
Examples of using snowflaking effectively in other ways.
Even if you are debt-free, you can use snowflaking to your advantage. Madison at My Dollar Plan recently wrote an article on MSN Money about how she now uses snowflaking to build her investments. The concept works the same, but instead of eliminating debt you are building assets. At Sense to Save, Kacie is using coins as snowflakes to help build a $10,000 emergency fund. At DebtBeater, the author suggests that the concept behind snowflaking can even be applied to losing weight! There seems to be no end to how one can use snowflaking to eliminate debt, build wealth, and improve their lives.
There are obvious benefits to using this fantastic technique. The key is to get started and the sooner, the better. If you want to learn even more, you should check out The Snowflake Revolution for the latest articles on snowflaking.