The Debt Snowflake Method: Is It for You?
Many fall into a pattern of accumulating debt without even realizing it. When this happens, it can be difficult to get out. If you are struggling to pay off debt, consider different debt payment methods to find what works best for you. One option is the snowflake method of paying off your debt.
What is the debt snowflake method?
Debt snowflake is a way to tackle your debts if you’re struggling to keep up with repayment. It is used to supplement the debt avalanche and snowball, two popular methods for taking care of all those pesky bills.
Debt avalanche method- using the avalanche method, you pay off your debt with the highest interest rate first. Once that is done, you move on to the debt with the next-highest interest rate. You keep going until all debts are settled.
Debt snowball method- the debt snowball is the opposite of the avalanche method. First, you pay off the smallest debt then work up to larger ones as fast and efficiently as possible. This is great for people who want immediate gratification or those looking at how much they've saved rather than just focusing on an overall amount paid off over time.
Both debt avalanche and debt snowball are great methods in debt management.
The debt snowflake method, on the other hand, works by accumulating small amounts of money, however way possible. For this method to work, you need to find ways to spend less on your daily expenses and use what you save to pay for your debt.
For instance, let’s say your typical workday breakfast with a large cup of coffee costs you PHP 300. If you opt to switch to a medium cup of coffee instead, you can save PHP 20.
At lunchtime, you opt to split a large meal with someone instead of buying two smaller, individual meals. This saves you PHP 80, bringing your daily savings up to PHP 100.
After your 9-5 job, you find a one-time freelance project that pays you PHP 1,000.
You end the day with an extra PHP 1,100. This money can be used to pay off your debts. It may seem small but the point of the debt snowflake method is to accumulate all these small payments until they make a big difference.
Making the debt snowball method work for you
While PHP 1,100 can help you shave off some of your debt, it won’t put a significant dent if your debt is in the six figure range.
The debt snowflake method is typically used as an add-on to whatever debt method you are currently using. Combining it with the debt snowball method lets you collect small amounts of money you can use to pay off your smallest debt because it is the easiest to pay off completely. This also gives you a confidence boost because you can instantly see the fruits of your hard work, and this will motivate you to save up more in order to pay off the next-smallest debt.
Alternatively, you can combine the debt snowflake method with the debt avalanche method by using the money you have collected to pay off your debt with the highest interest first.This will lower the amount of compounded interest you have to pay in the future. It may take a while before you completely pay off your debt, but it is a more efficient way of doing so.
Where you can find extra money
One good way to make sure you set aside the small savings you make is to leave a change jar by the door. At the end of each day, drop whatever coins and small bills you have left into the jar. Once the jar is filled up, you can use this towards paying some of your debt.
Being in debt can be scary, especially when you think about how much money you need to pay it off. By applying a debt payment method that works for you and combining it with the snowflake method, you can slowly but surely reduce the amount of money you owe. All you need is to be disciplined and stay focused, even when the task seems impossible at first.
Metrobank is committed to guiding you in your financial journey. If you need more help with learning how to better manage your finances, you can check out Metrobank’s Money Basics articles.
