Snowballing / Snowflaking Your Debts

I recently came across the term snowflaking – a method for repaying your debts – which I’d never come across before, so I thought it, and the related snowballing method, warranted a little investigation.

To explain snowflaking we first need to understand the concept of snowballing your debts, where snowflaking stems from. Snowballing is often quoted by money saving experts as being one of the best ways of repaying your credit card debts.

Snowballing requires you to prioritise your debts, either by the smallest amount or highest interest (depending on which view point you have – one makes more mathematical sense, the other has psychological advantages), pay the minimum off each debt, but then also start paying as much as you can above the minimum payment towards the chosen debt. As the balance reduces, continue to pay as much as you can, and the debt will reduce quicker and quicker – a snowball effect. Once the first debt is repayed, move the payment onto the next debt, again paying as much as you can above the minimum payment.

Snowflaking is simply paying off any little amout you can, as soon as you can, along with the minimum payment on your debt. So whenever you make a little money here or there, it gets payed off the debt as soon as is practical. All these little snowflakes make a snowball – do you see the link now?!

As I alluded to above, using the method where you focus on the smallest debt first is kind of counter-intuitive to most that is taught in personal finance, which is to tackle your highest interest debt first. But whilst it doesn’t necessarily make mathematical sense, the idea is that it can act as a motivator to carry on with the method, as debts disappear quicker (the repayer gets more instant “feedback” that their payments are working).

You may find that you prefer one method over another – the feeling of getting rid of your highest interest debt first might be better than seeing your small debts disappear – the most important thing is to have a system in place to repay your debts.

If you need help with the mechanics of snowballing, this snowball calculator may help you work out what you should start repaying first, and will give you an idea of how long it will take you to repay your debts. It will also tell you how much better off you’d be by concentrating on your highest interest debt first, rather than your smallest amount. It’s up to you to decide which method to take.

What are your thoughts on snowballing? Have you tried it? Which method did you go for – smallest debt first, or highest interest? Let us know in the comments below.

Creative Commons License photo credit: PetitPoulailler

2 thoughts on “Snowballing / Snowflaking Your Debts

  1. Great blog post, love the snowflaking/ snowball analogies, and the snowball calculator is very handy too. I am more of a full-on snowballer, paying off the debt with the highest interest first. Paying off the smallest debt is not a motivator to me, I need to know what saves me the most money now – that is motivation enough!

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