Facing the reality of paying off a pile of debt can inspire feelings of overwhelm and defeatism. It can be hard to believe a vault full of cash will make any difference, let alone a few dollars and cents. The snowflake method aims to prove that every little bit counts.
How it works
The foundation of the snowflake method rests on making small changes that add up. Any money saved from making those changes, even 5 cents, is put towards paying off debt. As time goes along, these tiny payments make a huge difference.
Example
Let’s see small change in action. We’ll use the debt profile below to demonstrate.
If we hold steady and stay with just paying minimum payments on these debts, it will take 32 years and 3 months to pay them off. You’ll also be dishing out $51,600.92, of which $40,511.92 is interest.
Simply paying an extra $25 a month on the debt will save you $25,846.97 in interest and 21 years in payments. If just $25 a month makes that much of a difference, think of what an extra $50 or $100 could do! Every little bit counts.
You can ramp up these savings by combining it with a debt management strategy like the debt avalanche method. We’ll explain what the debt avalanche method is later on. For now, just know it’s about being strategic about which debt you focus on first. By combining the debt snowflake and avalanche methods, you would save over an additional 2 years and $680.
Debt avalanche and snowball strategies
The avalanche and snowball methods are pretty similar, with just one main difference. They both center around paying minimum payments on all debts but one. For the debt avalanche method, that one payment is the debt with the highest interest rate. For the debt snowball method, it’s the payment with the shortest term. Once that first debt is paid off, the focus switches to the next highest interest rate/shortest term. This continues until all debt is paid off.
Keep in mind that when a debt is paid off, the funds that were being put towards that debt don’t go into your wallet. They get rolled over to the next debt. It’s this rollover that creates a lot of momentum to pay off the debt faster and save interest.
What makes these methods different from the snowflake method is the payment. Extra payments for the avalanche and snowball methods are typically a fixed amount.
Small changes
When you really start to look, there are endless ways to save snowflake contributions. The best ones are easy to implement and don’t make you feel like you’re losing out or sacrificing. Here are just a few.
Going on a coffee run? Buy a medium instead of a large.
Round up your purchases to the nearest dollar, put the change towards your debt.
Get a tax refund? Snowflake it, or at least a portion of it.
Any money saved using a coupon.
Side hustle cash. For example, walk your dog every day? Take on a dog walking client.
Take your lunch to work one extra day a week.
Cash back earnings from your credit card.
Tips for success
Like any good strategy, there are certain best practices that help boost the chances of success. Here are a few for the debt snowflake method.
Micropayments
Lessen the chances of spending these small payment boosts by applying them to your debt frequently. If possible, you can even automate these payments.
Track
Regularly keep track of the money you’re saving. Not only is this necessary for knowing how much to put towards your debt, but it will also help keep your goal top of mind. Seeing progress can also be motivating.
Gamify
Make the whole process a game. This can be challenging yourself to a no-spend day or finding a buddy and seeing who can save more in a week. Switching out savings tactics often is another gamifying strategy. It’ll keep your interest piqued and prevent feeling restricted.
Pros and cons
As with any strategy, the snowflake method has its upsides and downsides. To help decide if this is the right strategy for you, here are a few of each.
Pros
There are no structured payments, making the snowflake method a very flexible option.
Anyone can do this method, making it very attainable.
The snowflake method offers lots of opportunities to improve your financial literacy.
Cons
This strategy takes planning and dedication. Neither of which is everyone’s cup of tea.
The small impact nature of this method can make it hard for some to stay motivated.
Who and when to use the snowflake method
The snowflake method’s tiny payments and flexibility make it a great option for those people or times with a tight budget. People who like to challenge themselves would also find this method very beneficial.
Who and when not to use the snowflake method
If you’ve already got plenty of wiggle room in your budget, it’s really best to tackle it head-on, more than what the snowflake method really encourages. You’ll wipe out your debt even quicker and save even more money that way. If you’re not a fan of organizing and find it tough to commit, this might not be the best debt management approach for you. You might find a regular, stable payment more effective.
Wrap up
It’s easy to forget that a big debt payment is really just a group of snowflake payments. Whether all at once or spread out, every cent chips away at your debt. It’s a mastery in how small, consistent changes in habits have a great impact.
If your debt is more than what the snowflake method can tackle, our trained credit counsellors can help. Call them today for a free consultation. They’ll discuss all the various debt-relief options available and make a recommendation on which one is right for you.
