What Is Debt Snowflaking?

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Ready to whittle down your debt until it’s non-existent? What’s the best method for your situation? Is there one that you and your partner can both agree on?

There are several tactics you can use to get your debt into a manageable state, with one of the more popular ones called Debt Snowflaking. Here’s how it breaks down.

How the Debt Snowflaking Method Works

The Snowflake method is a twist on the Debt Snowball strategy, which we discussed in detail in a previous article. In addition to tallying up your debt totals and putting them in order from the lowest balance to the highest, you then start making micro-sized debt payments to accelerate your debt payoff.

Instead of using a larger amounts of money to pay off your debt (aka a snowball) you use smaller payments (or snowflakes) made more frequently. Here’s how: Anytime you receive extra money, from a weekend job, sale on Craigslist, or other income-generating idea, you immediately make an extra payment towards the loan.

This idea has both financial and psychological benefits as it speeds up your debt payoff momentum and helps boost your confidence with small and frequent wins.

These small snowflakes of progress. also decreases your overall interest rate on your debts. It’s all about the idea of small steps that can lead to great leaps forward and help you gain financial freedom, until you’re completely debt free.

Basic Steps of Debt Snowflaking

Once you’ve established your game plan and chosen the right strategy for paying off your debts, here are the steps to take:

  1. List the totals of your debts from the lowest amount to the highest
  2. Find ways to earn extra funds (one blogger uses the gigs for goals mindset)
  3. Put all found money, extra income, side jobs and leftover money towards your debts
  4. Make sure you’re covering at least the minimum payments each month
  5. Continue throwing additional snowflake funds to your accounts until you’re debt free

You can use this strategy in addition to the Debt Snowball method (or even the Debt Stacking method), or it can be used on it’s own. Just be sure you’re covering at least the minimum amount due every month.

Sometimes it’s easier on your budget if you make four-$25 payments instead of one-$100 lump sum payment. It’s the same amount in the end, but it makes it simpler to handle in the long run. Plus, you won’t run into debt payoff fatigue nearly as quickly.

It’s also a nice strategy to use when you want to avoid “snowball fights” with your significant other. As mentioned, a snowflake is less noticeable than a larger snowball — especially when the payment amounts become much larger towards the end of your debt payoff process.

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What You Should Know About This Method

Like with any debt repayment plan, there are few important things to note about Debt Snowflaking before applying them to your financial situation.

Check with your lender for payment limitations. Some lenders have a cap on the amount of payments you can make towards a loan in any given month. Make sure you don’t get penalized if you make extra payments on your debts. You should also request that all your extra payments be directly applied to the principal balance — otherwise you won’t be saving as much on interest payments.

Sign up for online payments or online banking. Since this debt payment method creates a lot of extra transactions (for extra money coming in and then going out towards a loan account) it’s a good idea to sign up for online banking. At any given time you can initiate a payment on the account and have it processed for free. Not all payment agents will let you do this, so take advantage of online access when possible.

Don’t mistake small steps for small progress. Smaller steps are a lot less overwhelming than taking giant leaps, but don’t underestimate the power it can produce. You might not think this method will make much of a difference, but it’s very similar to having small holes in your financial bucket. Before you know it all your debts are gone and you can finally be free from debt.

Would you consider the Debt Snowflake method to pay off your debts? Why or why not?

Image Credit: LadyDragonflyCC

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