I talk a lot about the idea of snowflaking, or earning and saving extra amounts of money above and beyond your normal budget, and then putting those to use consistently to further your financial goals. When snowflaking money to help supercharge your financial goals, snowflaking extra earnings is often a much more straightforward process than snowflaking money saved through frugality or wise choices. When you earn extra money, it seems in a way more tangible and present, and the process of snowflaking it towards your financial goal can be instant. With savings, the money may not be readily apparent outside of some numbers in your head or on paper, and there may be other factors to consider. So how do you benefit from the fruits of frugal living as well as you do from earning extra money?
The process is actually rather similar to snowflaking extra earnings, for the most effective way for snowflaking of any sort is for it to be early, often, and instant. The more space there is between the action that generated the snowflake, and the actual use of the snowflake towards your financial goals, the more likely it is that the snowflake will get lost, or melt, along the way. As soon as a snowflake is generated by an act of saving money, make note of it. If possible, use it immediately towards your targeted financial goal. It doesn’t help to save money if the money you saved just gets lost in the shuffle, which with small amounts can happen very easily. Then figure out how best to apply the money towards your financial goal. Depending on what that goal is, I have used two strategies in the past: the snowflake account and the instant transfer process.
When my snowflake target was my credit card, I would instantly transfer money online anytime I generated a snowflake. From just $1 to hundreds of dollars, whatever it was, I put it to work. This is beneficial because it can immediately affect how much interest you are paying. If your principal is lower, your interest is lower. This also works if your snowflake target is a savings goal. You can instantly transfer your snowflake to your savings account and put it to work earning interest for you.
But sometimes we can’t make unlimited extra payments, or we have a minimum contribution at a time. I have that right now with our student loan payoff. If I pay less than twice the minimum payment, the payments get applied differently than I would like. So I save up snowflakes to pay off in one payment a month. But with that process, it is easy to lose track of snowflakes, especially small ones. To combat this I created a savings account that I call the snowflake savings. It is directly linked to my checking account, and every snowflake I earn or I gain from saving money, I put into that account. Giving myself an instant option helps to not lose trackof all those snowflakes, and keep them in one place until I can use them.
Whatever your method, don’t ignore the snowflakes you create by saving money somewhere. It is easy to let those be just words on paper, but actually physically taking that saved money and putting it to use is what makes it a powerful snowflaking tool.