How Do I Actually Snowflake My Savings?
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.
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August 5th, 2008 at 7:47 am
I have seen many of my snowflakes get lost or melt recently because I was not making sure that I used them immediately towards our debt. We no longer have credit card debt so, like you, I don’t have instant access to pay on my debts. When it was credit cards that I was snowflaking it was so much easier. Now I have the student loan payment and a loan from the government which is even harder to pay more toward than Salliee Mae! Thanks for this reminder and the boost it gives me to actually put the extra money toward the debt.
August 5th, 2008 at 8:49 am
This is a good example of where a well-defined written down budget is vital. When I know that my grocery budget is $80.00 per week and I’ve spend only $65.00, it is very clear that I should be transfering $15.00 into another budget category to make it work the hardest for our family. I’m currently saving up for a trip that will occur in February, so the $15.00 would go to that account. If I didn’t have something I was saving up for the money would go into the general savings account and increase our emergency fund from 4 months to 6 months living expenses.
This concept of snowflaking savings has been instrumental in creating wealth for our family. At this point, I’ve reached the maximum amount in my medical budget category (for oop costs, vitamins and the like). I no longer add to that category. I transfer the same dollars into the general savings thus more than doubling the amount I’m putting away every two weeks.
Snowflaking + budget = financial success
August 5th, 2008 at 8:49 am
I do something similar. I use a program called Budget for Windows. It’s an “envelope method” of budgeting. Right now we are snowflaking our van loan and I have created an envelope just for that. Any time I’m able to spend less than expected from another envelope, I move what’s left to the “van snowflakes” envelope. Then when it’s time for the regular van payment, I also send in whatever is in the snowflake envelope as well (applied to the principal, of course.)
Every little snowflake helps!
August 5th, 2008 at 2:48 pm
My bank/credit union limits the amount of electronic transfers I can make per month to six. They tell me it is a federally mandated restriction–though I am unsure I believe it. Therefore, I can’t snowflake day to day when I save money by being frugal. I noticed another blogger say that she manages her snow flaking in her bookkeeping software. I could do the same in your check register, and then at the end of the month make one transfer to savings for all my snowflakes.
August 5th, 2008 at 3:02 pm
i do the exact same thing. i opened a “snowflake savings” account that holds all my snowflakes for the month. at the end of the month i send them to wherever i’m focusing on at the moment.
August 5th, 2008 at 4:34 pm
You’re right! Those little snowflakes do “melt” if you don’t track them. I use the oh-so high-tec post-it note. I write everything down immediately on a post-it note in my budget folder. Then, once a week or every two weeks, I send the snowflakes off to the credit cards. I also post my monthly snowflake total on my blog to remind myself that those little amounts of money do matter!
August 6th, 2008 at 4:46 pm
I hadn’t ever heard of a snowflake until now. I try to keep up but hit and miss with my reading. Great tips here. I love them! I will have to try and start doing this myself.
The one thing that I started doing is I have created an automatic withdrawl from our checking account. Every week $50 no matter what is taken out of our checking account. I already have that in our budget every week right under tithe. This way I won’t forget and mess up.
Another thing that we do is round up on our checks. There again every penny counts. So, if I make a check out for $9.34 I round up to $10. I know that we should have at least $500 extra in our checking account right now because of this. I just keep doing it and one day I’ll use that extra for debt or maybe a vacation when we pay off our debt!
Thanks for all of your tips I really enjoy them.
Angie