Being in debt not only impinges on your financial freedom, it weighs down your quality of life. For people and families who have little to no money at the end of a pay period, the debt situation can feel hopeless. You’re barely making minimum payments, which means you’re just scratching the principle and most of what you pay goes toward interest. There’s no end in sight.
Enter snowflaking: a debt repayment plan of using extra money found here and there to make extra payments. It’s called snowflaking because you accumulate small individual pieces to make a large difference. Any given snowflake is miniscule, virtually weightless, but enough of them put together create an avalanche that changes the shape of a mountain.
Let’s look at how to use the debt snowflake process to pay down debt, how to overcome the most common obstacle to making it work, and what to do once you’ve packed enough snowflakes together to make a good sized snowball you can lob at your finances.
The Debt Snowflake Method in Detail
Using the debt snowflake, you find small amounts of money to put toward your debt. Each individual contribution makes little difference, but with focus and discipline, they can add up to a significant amount by the end of each month.
There are two ways to find and accumulate those tiny cash snowflakes. The first is to find techniques for small savings in small ways like:
- Collect loose change at the end of every day
- Grow a garden to cut down on grocery bills
- Eat out rarely, and skip the booze when you do
- Find small daily expenses and cut them to every other day
- Make small changes to cut down utility bills
- When you go shopping, always put one item back at the register
- Cancel subscriptions you’re not using, and downgrade subscriptions you use
- Put found and forgotten money in a change jar
- Buy generic and store brands when you can
- Pack lunch when you go to work
- Ask for discounts at the register
- Renegotiate rates with your insurance and other service providers
- Use the library instead of buying books, music, and videos
- Use coupons and cash-back apps
The other way is to make extra money from any number of sources like:
- Selling big-ticket unwanted items on Craigslist, OfferUp, or similar sites
- Holding a garage sale to get rid of books, clothes, and other small-ticket items you no longer use
- Starting a business on Etsy, eBay, or another online marketplace
- Selling your skills by tutoring, dog walking, or starting a handyman service
- Getting a part-time job, or a side hustle gig
- Rent out a spare room
- Negotiate a raise at work
- Participate in for-cash surveys
- Trade in old electronics for cash
- Sell unused gift cards
As you can see, there are dozens of ways to inject extra money for paying off debt into your budget from both sides of the cash flow equations. How you save or make the little bits of money doesn’t matter.
Most people who successfully apply the debt snowflake do it by using dozens of methods from both categories.
What’s important is that once money is collected it goes toward your credit card balance and other debts. It doesn’t end up spent on pizza, or a fancy latte, or stuck in an account for your next vacation. Those luxuries come later, after you’ve got your debt under control.
How to Make the Debt Snowflake Method Work
The biggest obstacle facing most people when they take on the debt snowflake method is that small amounts of money tend to get spent. Think about the last time you had a $20 bill in your wallet. It likely stuck around in there for a while, but the second you broke it, those fivers and one-dollar bills vanished almost instantly.
It’s like that with the snowflake method. You find an extra $5 here and there, but then you spend it on some other purchase before it makes its way to your creditor. Luckily, experts have identified a few good methods for directing those micropayments in the right direction. Here are a few of the best.
1. Create a Savings Bank Account
Make one account exclusively for your debt snowflake money. Put your extra money there as soon as possible. Putting the cash in a savings account keeps you from spending it. Making the account separate from other funds earmarks it for spending on debt.
Be sure the account is fee-free, which is common enough with most modern banks. Also streamline your debt payments so you can pay directly from this account if possible. If not, set a time once or twice each month to transfer any money you’ve saved to your checking account, then make the payment during the same session.
2. Have a Snowflake Jar
Choose a vase, Mason jar, or similar place to put your change at the end of every day. It should go someplace convenient, like your bedside table or wherever you put your keys upon arriving home. Loose change, and even dollar bills, go in there automatically every day, as does any cash you saved by consciously choosing not to buy something in order to save money.
Set up one hard-and-fast rule: money that goes into the snowflake jar only comes out when you’re taking it to the bank. Make that run as often as you must to avoid temptation, and make the bank your first stop on that day’s errands. Never give yourself permission to dip into this fund for other expenses. That runs against the whole point of the debt snowflake.
3. Install a Rounding Up App
A rounding up app like Chime or Acorns connects to your savings account. Each time you make a purchase with any cards you connect to the app, it rounds up the price to the nearest dollar and deposits the difference in your savings.
For example, if you spent $27.99 on gas, $4.27 on a latte, and $49.49 at the grocery store one day, the app would round up to charge $30, $5, and $50 — depositing 1 cent, 73 cents, and 51 cents into your savings.
Some of these apps don’t put money in the bank, but rather use the rounded-up funds to start an investment account. They’re also a pretty good deal, but not appropriate for your debt snowflaking needs. Make sure the app you choose has a savings account option. Also note that many banks will let you set this up for your debit card without a third-party app.
4. Have an Accountability Buddy
It’s easier to cheat when you’re acting alone than when you have somebody encouraging you to stay on track. Similarly, it’s easier to skim a few dollars or cents from your savings when nobody’s watching how much you deposit in your snowflake jar or snowflake savings account.
Get a buddy to help you with those clutch moments, to keep you on track toward your long-term debt goals. In many families, your partner is the best accountability buddy. They’re working the same plan, toward the same destination, and they’re nearby.
If that’s not an option, talk to a friend about setting up accountability between each other. The more formal you make it, the better you’ll succeed.
5. Keep a Special Pocket
Assign a pocket in your pants, coat, or purse that’s designated for the money you saved. If you save cash, put it right in there. At the end of every day, put the cash in your designated snowflake jar.
When you save money and pay with a card, write down how much you saved on the receipt, then put that receipt in your pocket. Later, transfer the saved money into your snowflake savings account. Doing this every night maximizes the chances that you won’t spend that money elsewhere, but if your schedule doesn’t permit this, keep a tally somewhere and move the money at least once per week.
6. Make It a Game
Humans do difficult things better, continue them longer, and feel happier about it when they do it in the context of competition.
You can compete with yourself against benchmarks you set — for example trying to save more every day throughout the week. You can compete with your accountability buddy to see who saves the most money, or cuts bills the most times, or earns the most extra cash over a set period.
While gamifying your snowflake efforts, avoid two common pitfalls. First, reset your goals every week or so. It’s easy to want to keep saving or earning more and more, but eventually that becomes unreasonable. End one game and begin another to beat that. Second, make sure you’re a good winner and a gracious loser.
7. Automate What You Can
The easiest way to save money regularly is to make it automatic and invisible. Once you cut $50 of monthly expenses by making changes to your bills, don’t rely on yourself to put that $50 into your snowflake fund. Instead, set up an automatic transfer from checking to savings on payday so you’re never tempted to spend that money on other things.
Automation can also help with reducing expenses further. As long as you can make sure there’s money in your account, autopay on your bills will protect you from late fees, penalty interest, and similar expenses associated with missing your due dates.
8. Set Goals
It’s much easier to stay on task for a long-term project by setting aggressive but reachable short-and medium-term goals. After a month or so of using the snowflake method, you’ll have a good idea of how much you can reasonably earn and save toward paying down debt. Use that information to set daily, weekly, and monthly goals to help you stay motivated and on track.
Bonus points for combining this with gamifying your snowflake efforts, and setting benchmarks for success. It also helps to combine the day-by-day savings goals and goals for actual payments on debt, so you stay on the case for both stages of this process.
9. Splurge Once in a While
Diets have cheat days for a reason: if you’re withholding things you want and like from yourself, eventually you’re going to give in to temptation. With a cheat day, you give in to that temptation in a structured and limited way that doesn’t ruin all the hard work you did up to that point.
Setting up a cheat day for your debt snowflake will similarly improve your chances for success. The best way to do this is to set savings benchmarks. For example, promise yourself that once you save $100, the next $30 you accumulate will go to ordering pizza for the family.
As you get used to snowflaking your way out of debt, you’ll find you’re able to go longer between splurges, setting higher and higher benchmarks.
The Next Step
Once you have money accumulated to make a payment, you can pay your debt down faster if you’re strategic with how you pay. Here are the basics:
- Set up your regular finances to make minimum monthly payments to all of your lenders
- Focus your accumulated snowflake payments on a single account, such as a single credit card or loan, maximizing how much you pay down its balance
- Repeat until that account is paid in full
- Move on to a new account, paying it with your snowflakes plus the minimum payment that had previously been going to the first account
To choose the account you pay off first, the snowball method recommends making the decision in one of two ways.
Start With the Lowest Balance (the Debt Snowball Method)
The Debt Snowball Method suggests you take all your snowflakes and throw them at the debt account with the smallest balance to knock it out fast.
For example, if you have three credit cards, a car loan, and a student loan with balances of $500, $1,750, $2,400, $3,000, and $5,500, you would first put your extra funds toward the account with the $500 balance.
The advantage of this method is that it’s more gratifying. You’ll see that balance dwindling to nothing rapidly and achieve debt payoff for that first account as soon as possible. Then you’ll get to see the snowball in full effect as you make even larger payments on the next account.
The drawback of this method is it doesn’t take interest rates into account. If the lowest balance account isn’t also the one with the highest interest, you’ll spend more money in the long run using this approach.
Start With the Highest Interest (the Debt Avalanche Method)
The Debt Avalanche Method suggests piling your extra payments into the debt account with the highest interest rate, which is typically credit card debt.
For example, if those five accounts above had interest rates of 17%, 12%, 8.5%, 5%, and 2.75%, you would put your extra payments toward the account with the 17% interest rate first, regardless of the size of the balance.
The advantage of this method is it saves the most money in the long run. By paying down high-interest accounts, you spend less on interest over the course of becoming debt-free.
The drawback of this method is it takes more patience, especially if the highest-rate account has a bigger balance. You might have to wait longer to see your first account paid in full, which can make it harder for some people to stick to the plan.
Final Word
One final warning about this method. Some credit cards and loans place a limit to the number of payments you can make on them in any given month. This is less common now than it was 10 years ago, but you should check your loan agreement to see what the terms are.
If your agreement has no limit to the number of payments, you’re good to go. If it does, consider using one of the shoveling methods that accumulates a larger payment into a savings account, then making just one or two larger payments each month.
