What is a debt flake?
A debt snowflake is a way to pay off debt that immediately captures small savings to use for unpaid bills.
This is a lot like other strategies that aim to speed up your date without debt, but it’s different:
In one debt snowball, you aim for the extra money on the smaller bill first, gaining a psychological victory by reallocating that payment to the next smaller debt.
In one avalanche of debt, you will first look for the most interesting debts, reducing the total interest paid. It is less rewarding in the short term but more effective.
The snowflake method, on the other hand, can make tiny savings on a daily basis and use them to make your debt-free day come even sooner. It is compatible with snowball or avalanche strategies. Like snowflakes, small savings collected over time can have a big impact. And you have to be quick to capture them: the snowflakes disappear quickly.
Identify your savings opportunities
View your spending breakdown to show your top spending trends and where you can cut.
Make the most of the money found
If you’ve budgeted carefully, you might think there is no more savings to be made.
But the small amounts of money you can fluff towards debt (or a emergency fund) may come from less obvious sources like:
Share a 12 inch sub with a friend when you would have otherwise ordered your own 6 inch sub (potential savings: around $ 2!).
Uncover a $ 20 bill in a coat pocket (and before bringing or giving clothes to the cleaner, please check all pockets).
An unexpected rebate check in the mail.
Remuneration for work outside your normal budget (lawn mowing, babysitting, animal sitting, babysitting).
You got the idea. We are not talking about large sums of money here.
We’re not talking about money in your budget either; we only find money. And you don’t want to divert the money you’ve allocated for your own discretionary spending – your budget won’t work without it.
The idea is to take advantage of these little cash surprises instead of letting them slip through your fingers, without the slightest contribution to your financial goals such as credit card debt consolidation and repayment.
Cash in small pieces of money
How do you keep such small savings from simply disappearing?
If you keep a jar of change, you can put the extra savings in it and use that money to help pay off the debt at the end of the month. The important thing is to make sure it’s not in your pocket or wallet, available for spending. If you are depositing cash, make sure the bank locations are suitable for you.
If it is unspent money in your bank account, some banks or credit unions may allow you to transfer even small amounts from checks to savings. (The last thing you want to do is accidentally trigger a fee for excessive transfers – and many financial institutions have them – because you moved $ 3.21 from checking to savings.) If not, you can give it a try. consolidate small transfers, say, once a week, or write a check to yourself.
If you are using snowflakes to wipe out a loan sooner, make sure that the additional payments are acceptable to the lender and that the additional money can be allocated to the principal.
If you are making “micropayments” on credit cards, make sure you don’t incur charges on each end of the transaction.