What are debt snowballs made of? Debt snowflakes!

During the twenty years I carried consumer debt, I made several attempts to change my habits. Every time I decided to lick the debt monster, I would follow the advice in the financial books: I'd arrange my debts in order, listing the one with the highest interest rate first. I'd pay extra on this bill for a couple of months, but then give up in frustration because I didn't seem to be making any progress — $100 extra on a $12,000 balance doesn't make a dent.

Eventually, I read Dave Ramsey's The Total Money Makeover. His debt snowball method changed my life. Ramsey writes:

Personal finance is 80 percent behavior and 20 percent head knowledge. The Debt Snowball is designed the way it is because we are more concerned about modifying behavior than correct mathematics…Being a certified nerd, I always used to start with making the math work. I have learned the math does need to work, but sometimes motivation is more important than math. This is one of those times.

Humans are complex psychological creatures. We're not adding machines. If we were adding machines, we wouldn't accumulate consumer debt in the first place! My debt wasn't acquired logically — it was a product of emotional and psychological responses. What I needed to get rid of it wasn't a mathematically ideal model, but a psychological “hack” — I needed the debt snowball.

With the debt snowball, you don't start with your highest interest rate obligations, but those with the smallest balances. You attack the debts you can eliminate most quickly. This may be counter-intuitive — in fact, it really bothers some people — but it works. (Here's more about the debt snowball method.)

I recently discovered a clever extension of Ramsey's snowball metaphor. Jaimie at I've Paid for This Twice Already practices what she calls “snowflaking”, an idea that seems to have originated at the iVillage debt support group. (This group looks like a great resource for those struggling with debt, by the way.) Jaimie writes:

What are snowballs made of? Snowflakes! Every month without fail, I pay a fixed amount to debt that is above my minimum payment due (about $800). I also try to collect little bits of money wherever I can, and to apply those to my top priority debt (my credit card).

I take surveys online, I sell possessions on craigslist and eBay, and I have yard sales. Any money I get from these endeavors goes directly to my debt. I also keep a strict accounting of all the money that comes in, and everything left over at the end of the month not earmarked for future expenses also goes directly to debt. These are my snowflakes. I have averaged over $200 extra going to my credit card debt every month due to these snowflaking efforts.

Many small snowflakes make a snowball, and no amount is too small to snowflake.

In December, Jaimie shared her five golden rules for snowflaking:

    1. Snowflake early and often. Start now and make it a habit. If you get accustomed to this, it can become a game. Snowflaking can almost make debt reduction fun.
    2. No amount is too small to snowflake. “I have snowflaked as little as $1.04 and as much as $1313.74 and everything inbetween,” Jaimie writes. “Any amount can be a snowflake, and any amount can make a difference”
    3. Anything can be a snowflake. Did a friend repay $5 she borrowed last week? Did you take cans and bottles in to redeem the deposits? Did Aunt Marge send you $20 for your birthday? Was your tax refund bigger than expected? All of these can be snowflakes.
    4. Snowflake as immediately as possible. This is key. Apply your snowflakes to debt as soon as possible, before you have a chance to spend the money. I know from experience how easily those extra dollars become books or videogames or new clothes. Snowflake when you get the money.
    5. Keep track of your snowflakes to use as motivation. “A lot of small amounts may not seem like a whole lot if you don't keep track of them,” Jaimie advises. “Keep a running total once a month to see how those small amounts add up.”

Though I didn't have a name for it at the time, snowflaking is the technique I used in the final stages of my own quest for debt elimination. I enjoyed taking any extra cash I had and throwing it at my home equity loan. It made me feel good. (It even felt better than buying comic books, believe it or not.) This was how I knew my relationship with money had improved and was almost healthy.

Just as the notion of the debt snowball seems absurd to some of those who have never fought with debt, snowflaking may appear a little obsessive. But I believe both are valuable tools. As someone who struggled with debt most of his life, I'm grateful to have heeded Dave Ramsey's advice. I'm also glad to have discovered “snowflaking”!

(Note: The debt snowball and debt snowflake concepts can also be applied to other financial goals, such as building an emergency fund, saving for retirement, or paying down your mortgage. I'm currently using these techniques to save a cash cushion so that I can completely quit my day job to blog full time.)

Photos by gluemoon.

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paidtwice
paidtwice
12 years ago

Great overview of the snowflake method! Thanks so much for your interest and support of my motivations. 🙂 Down with debt, up with savings!

Dar
Dar
12 years ago

Note you can get Dave’s podcast free on iTunes or at his site (www.daveramsey.com). It’s the first hour of the full three-hour radio show. You can get the full show, but you’ll need a membership, which, I assume, means forking over some $$$.

Also, he’s got a TV show on the Fox Business channel, but I unfortunately haven’t had the chance to see yet.

In any case, you can’t go wrong listening to or reading Dave. Getting out of debt and living successfully is simple–it’s not easy, but it is simple.

HollyP
HollyP
12 years ago

Loved this post. This has motivated me to move some of my languishing snowflakes into my Roth and mortgage.

Many years ago when struggling with multiple debts, I did a spreadsheet to determine which debt to pay down first. No matter which way I cut it, it was always best to do the lowest balance first.

Kelly
Kelly
12 years ago

Great article. I’ve just started snowflaking- my first goal is to finish the month in the black, and as of February 1st, I’ll be using snoflaking (in part) to build my emergency fund. Then on to the debt!

Drea
Drea
12 years ago

My husband and I have been using the debt snowball method for the last 6 months and if our calculations are correct we will have paid off all credit card debt by the end of 2008. We have also established the E-fund as suggested. (It paid for the removal of a dead tree in December that threatened to fall on our home.) The next step we have decided to take and begin applying is taking every little bit of extra $$ (Christmas gifts, bonuses, tax-refunds i.e. “snowflakes”) dividing it in half and apply half to debt and half to savings.… Read more »

Nicole
Nicole
12 years ago

Much as I love Dave Ramsey (and I do – i watch his show every day on Fox), the idea of paying the lowest balance rather than the highest interest just would not work for me. I understand his debt snowball strategy has helped a ton of people. For that reason, I think it’s great advice for those people, but not necessarily for everyone. I have no credit card debt but i graduated from law school five years ago with more than $100,000 in student loan debt. My strategy was to pay off my $60,000 private loan (at 6.5%) first,… Read more »

Anne
Anne
12 years ago

Jeez, Nicole. You and I have pretty much the exact same debt profile. I also started out with no credit card debt, but with six figures in law school debt with roughly the same proportions at high(er) and low interest rates. My paydown strategy is also very similar to yours (though this year I am really focusing on wiping out all of my remaining student loans, but at the same time I am continuing to contribute the max to my 401(k) and put a little bit of money in savings every month). I think you have to consider DR’s audience.… Read more »

Nicole
Nicole
12 years ago

Anne – you’re pretty much spot on – my monthly payments are about $213. It is automatically taken from my checking account and I barely notice it. I definitely do not feel like a slave to debt.

jane
jane
12 years ago

About listening to Dave Ramsey online. You can get his whole show without signing up for anything you just have to listen to the comercials. Signing up gets you it comercial free.

Dan
Dan
12 years ago

Nicole, You are looking for a personalized answer, which you won’t find from an article. Dave Ramsey’s method works because it is simple and focused. Of course, there are ways to improve the financial benefit if you can maintain the same focus and discipline. You benefited by paying off the higher interest rate first. If you received a company match on some of your 401(K) investment, you benefited from that as well. On the other hand, how would things look right now, if you hadn’t done the 401K and IRA investment? Judging by the numbers you gave (60K of debt… Read more »

Kelly
Kelly
12 years ago

I love Dave Ramsey! My husband and I read his book back in October and started our Total Money Makeover November 1st. Our budget is extremely tight even with frugal living and couponing. Other books I had read and tried to follow always say to pay down the highest interest rate debts first, but our 9 unsecured high-interest debts have balances ranging from $500 to $10,000 and I was frustrated working on that largest one as it happened to also be the highest interest debt. As we are just starting our first serious attempt to get out of debt, snowflaking… Read more »

Darrell
Darrell
12 years ago

Fantastic article! We have been practicing the same methods and as of 3 mintes ago we (((finally))) paid our IRS tab off 😉 And, our personal loan will be paid off by the end of this month. It feels like a slow process, but once you get that ball rolling, it does roll faster and faster.

Asithi
Asithi
12 years ago

I have been snow flaking towards savings for years. Even ever I get a rebate or “extra money” I automatically put it into savings. Sometimes my husband wonder why I even bother with a $1 rebate from Rite Aid. If I see a $1 lying on the street, I would pick it up, so why not get the $1 rebate? Besides with rebates these days, you can enter the receipts online, it is not that inconvenient. I know he thinks it is a waste of my time, but I do not think time spent in front of the TV is… Read more »

Mrs. Micah
Mrs. Micah
12 years ago

I find snowflaking a really exciting idea. I especially like something Jaimie mentioned in one of her budget-related posts.

Every budget item you don’t spend completely is another snowflake.

Sam
Sam
12 years ago

We used the Dave Ramsey debt snowball method to pay off $55,500 in unsecured debt in 12 and a half months. We even did some snowflaking along the way, $100 or $50 payment in between our larger payments. Our last debt was very low interest (good debt, my husband’s MBA student loan debt) at 3 1/2%. The snowball really worked for me but we did modify Dave’s Baby Step #2 by continuing to contribute to our 401ks.

Jeff@My Super-Charged Life
[email protected] Super-Charged Life
12 years ago

Excellent article! My wife and I have been working on paying our debt off for about the last 18 months. We expect to be debt-free except for the house in February. We are avid followers of Dave Ramsey. We are meeting with a one of Dave’s Endorsed Local Providers (ELP) for investing in the coming weeks so we can start building wealth!

J.D. – How does it feel to be debt-free?

Cheap A55
Cheap A55
12 years ago

Great article. One of my new years resolutions is saving. I have a 5 digit debt on my credit card that I’m planning on paying off in 16 months. I used this snowball method to get rid of 3 other smaller debts and now I’m ready to attack the big one. It does make it easy for you to focus on the sole target. Small things do add up. I recommend everyone to track every penny for at least 2 months or so to see where your money is going. I’m using this spreadsheet template you can download from here:… Read more »

Nicole
Nicole
12 years ago

Dan – wow – the mind boggles I have no idea how you came up with all that, but it’s impressive. One thing I’m not sure you considered – not maxing out my 401K would likely have bumped into a higher tax bracket and may even have subjected me to AMT. I still feel that maxing my 401K is the best thing for my finances. Although, unlike you, I wouldn’t have the slightest idea how to monetize what I just said. Nevertheless, your illustration was very helpful. If I had paid off the debt more quickly and waited to start… Read more »

Minimum Wage
Minimum Wage
12 years ago

Whoa, I don’t even see $1313.74 in a whole month.

paidtwice
paidtwice
12 years ago

@MW – my spouse got a cash gift of $1000 that month from his dad related to an inheritance. That’s where the vast majority of the $1313.74 came from. 😉 Not a repeatable occurrance in our world. Although I am working very hard to earn whatever I can wherever I can.

Frugal Bachelor
Frugal Bachelor
12 years ago

Sorry, but I don’t like the debt snowball method, and especially not the debt snowflake method. Putting every single penny towards debt, IMHO, is letting debt rule your life. You will work very hard to pay off your debt but then find your self with no savings which I think is pretty depressing. A savings snowflake is a better idea – put all extra money into savings and pay fixed amount towards debt. Then you will emerge from debt and have a good chunk of change. Why the obsession with paying off debt so quickly? I don’t let it get… Read more »

Aimee
Aimee
12 years ago

I really love this analogy! Thanks for posting it. 🙂

paidtwice
paidtwice
12 years ago

@Frugal Bachelor – I don’t pay every penny towards debt, and I don’t think that the debt snowball advocates that either. For me, an emergency fund is key. I just had to use it, in fact, and am in the process of rebuilding it.

The obsession, for me, with paying off debt so quickly is that while I wasn’t – debt *was* ruling my life. The more I pay off, the freer I become.

Cynthia
Cynthia
12 years ago

I love the debt snowball and debt snowflake method too! It is such a great feeling to see those numbers tick down lower and lower.

Its No Joke, Im So Broke
Its No Joke, Im So Broke
12 years ago

How do you make money online? I can not seem to find any legit companies, or companies that do not require reading a million emails to get a check for $25. Any and all suggestions are appreciated…

Thanks

Great post…Once I begin to earn my real salary I will practice snow flaking…

Wayne
Wayne
12 years ago

J.D.,
I was wondering where and how you get paid for answering surveys? I’ve always wondered and thought they were scams. I would appreciate any info on legitimate survey sites.

Thanx,
Wayne

J.D.
J.D.
12 years ago

I don’t get paid for answering surveys, but apparently the guest poster does. In fact, I almost removed that part of her post because I, too, was under the impression they’re all scams. If you want more info, visit Jaimie’s web site. She may have a post or two about it…

Phil A.
Phil A.
12 years ago

The best advice is to avoid debt in the first place by not buying things you don’t need. Then you can have savings snowflakes which become savings snowballs.

Siena
Siena
12 years ago

I think this is a good idea–but be careful when you pay in small segments online to your credit card. Some cards will let you make unlimited online payments–but others have a maximum amount per month and will charge you from $5 to $15 for any payments over the max amount.

Don’t quote me, but I believe Citicards only allow you 4 online payments in a month–also maybe HSBC.

paidtwice
paidtwice
12 years ago

@Wayne – I have a post in my sidebar listed under popular posts called “Surveys for fun and pocket change” that lists the sites I use and what I think about them. I called it pocket change for a reason – no one’s getting rich doing surveys. I use them to fill otherwise “dead” time that I wouldn’t be doing something more productive anyway. The ones I listed are not scams and I have gotten paid doing them – but as I said, don’t expect to make a living from it 🙂 @Phil – savings snowflakes rule :). I’m getting… Read more »

Taylor
Taylor
12 years ago

Anne and Nicole – I started with a situation very similar to yours – worse off actually. I had $160K law school and undergrad loans and $15K in credit cards at the time that I graduated (L’03). I am not out of debt – quite the opposite actually, but I sleep okay at night – this is why: I lived in a apt for 6 months after I found a job (which took a couple of months). During that time I paid off my credit card and made the minimum loan payments on my student loans. Then I purchased my… Read more »

Sarah
Sarah
12 years ago

The thing about rolling student loan debt into house debt is that you just took unsecured credit and made it secured. That’s a significant step up in risk, I think. I’m in the same situation as you guys, only a few years behind you. I don’t really think Dave Ramsey is talking to us (kind of a relief for me, actually–I don’t like the guy). Given that we’re probably paying the highest tax rate we will ever pay, I think there’s a good bit to be said for directing the money into tax-advantaged accounts like 401(k)s, not even considering the… Read more »

Nicole
Nicole
12 years ago

Taylor, Sarah, Anne It’s nice to hear from people in similar situations – maybe we can start a pf blog for lawyers in debt. LOL! I already quit my biglaw job after two years and am happily working at a smaller lawfirm, where I plan to stay indefinitely. I will be adding to my commute significantly in order to reduce my housing payments, but it’s worth it to me. My rent is outrageous! Taylor – I admire what you are doing by creating rental income. I would love to buy a duplex where I can rent out one apartment. However,… Read more »

Frugal Dad
Frugal Dad
12 years ago

I love finding extra “snowflakes.” I roll coins, take surveys, sell old books and even hunt for change around closed concession stands at ballfields after a busy weekend (yes, it can get a bit obsessive!).

Regarding the surveys, I’ve actually made a good bit of money with one survey provider and have a link on my blog if you are interested.

Wondering
Wondering
12 years ago

I read in responses above about completing surveys for snowflaking and am wondering if anyone has found any legitimate companies that pay you for processing rebates. Like the surveys, I’ve questioned their legitimacy, but wonder if anyone has found any legitimate ones.

David L. Brown
David L. Brown
11 years ago

I just want to say thank you to Dave Ramsey and his family and his staff too…God bless you all… I am using your “SnowFlaking” program and the “SnowBalling” program each month to reduce and get out of “Debt”… Each week, I go and pay a small amount of money on each of my “Credit Cards” -4- of them and I am also now able to contact the “Credit Card” companies and pay my payments to each of them before they get the statements out to me…ie; I learned how to save up a -1- month amount of money that… Read more »

Money Funk
Money Funk
11 years ago

I am following Ramsey’s Snowball method. Works great!

And now I know what snowflaking is… as overtime, selling junk, etc… is all the extra being applied to our debt. Cool! 🙂

Andrew
Andrew
10 years ago

I have just launched an app for the iPhone to help people keep track of the amounts they have snowflaked over a period of time.

You can download it from Cashflake

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