Snowflaking is a method to increase your ability to meet your savings or debt reduction goals. It is the practice of spending more than the minimum on your number one targeted financial goal, be that paying down debt or increasing savings. This can be done by simply moving money towards that #1 goal whenever possible, or more systematically by keeping track of your spending and savings down to the penny. On top of your normal budgeted amount that goes to your #1 prioritized goal, when you earn or receive anything extra that you haven’t already budgeted, it is directly assigned to that #1 goal. This can be a small amount, like earning some side money babysitting or selling something on eBay, or a large amount, like an unexpected windfall or eliminating a budgeted expense. In my life, I employ the idea of snowflaking for both money that comes in (when money comes in that I wasn’t expecting) and money that goes out (when I spend less than I budgeted in another category). It is a simple concept that has helped me achieve goals I never imagined a few short years ago.
I am a proud snowflaker. I keep track of my pennies, I allocate everything down to the last cent, and I collect the “extras” and put them to work for me. But I wasn’t always this way. I spent a long time not keeping track of anything I saved or spent except the bills that came in. I made sure I paid all the bills but I also spent anything else I had without really thinking much about it. I never realized how much I spent without thinking about it until I started tracking all of my spending, and in that moment I became more proactive in my working to improve my financial position. Instead of letting money (or my lack of it) control me, I worked to gain control over my money.
Knowing what I was spending my money on made me start questioning why I was spending my money in this manner. Was what I was spending reflective of my overall financial goals? Did it reflect my values and desires? Or did I simply take the path of least resistance?
By allocating all my money beforehand and then using what extra comes in to work towards my overall financial goals, I have taken an active rather than passive role in where my money goes. This has given me a level of control over my finances that I previously lacked.
I spent a lot of time in my first 30 years bemoaning the fact that I didn’t have any money. I grew up in a lower income household, and I am not in a position now where we take in momney hand over fist. I felt I was a have-not, and I let that color my perception of money and its role in my life. Not much has changed as far as what I have monetarily – but I honestly feel part of the haves now. Only because I now feel like my money is working in my favor instead of me working against my money.
In the past, when we had an unexpected event happen (and as in most people’s lives, we had our fair share) it was always a scramble to figure out how to cope with it. And there was never a good solution. Be it credit cards, relying on the kindness of others, or resorting to not paying one bill infavor of another even the smallest of emergencies turned our household upside down. Now I’m prepared for the small, and plan for the large.
I’m more thoughtful. More considerate. I think more, and I act less rashly. Not just about money, although that is where it started. I honestly give more thought to most of the actions I take, and consider more the little things. Instead of always looking for the big score (or the big gesture) I’ve learned the power of the small ones.
The concept of snowflaking has truly had a powerful impact upon my life. And I have the internet to thank! I always knew my computer was a good thing.
Like many people, I have big dreams. I aspire to accomplish big things, and I look to the future and picture myself on the other side of whatever obstacle I face. But in reality, the way to get to that other side can look so daunting and seemingly endless that I feel discouraged before I even begin. That was how I felt about our finances and our financial situation for a long time. My reality was all I knew. Everyone I knew was struggling to get by, and living paycheck to paycheck. I didn’t know that it was possible for anyone but the wealthiest of people to live a different way. I couldn’t see the potential that was there because of how far away it seemed.
This is why the concept of snowflaking works so well for me. Snowflaking takes that big picture you imagine, and breaks it into tiny steps that can be easily accomplished. Tracking those small steps over time, you get closer and closer to your goal, and as you continue, you pick up momentum. The goal gets easier to imagine as you move slowly but surely towards it, and make progress that you can track and see for yourself.
Yesterday I made another car loan payment, and now we owe a little bit over $1300 on that car. The other car is about to hit 200,000 miles and has been completely paid off for a while now. Ask me 2 years ago, and my goal would be just to keep both cars running long enough to get them both paid off before I had to replace one of them and take on a new car payment. The goal now? Keep both cars running until we save enough to pay cash for our next car. Depending on how soon one of them has to be replaced, we may or may not accomplish that goal. This time. But even if we take on another car loan in the future, we’ll still be closer to making the no debt dream a reality than we were before. Because now we know there is another way.
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.
The concept of snowflaking as I understand it originated as a spinoff of the debt snowball concept popularized by Dave Ramsey. The snowball was all the money that you could commit to budgeting to debt every month, and added to that, are the snowflakes which help your snowball grow. Those small amounts that are the result of extra effort, windfalls, unexpected savings, or any other non-budgeted items that you can collect up in a month to give your snowball that much more power. The name itself, snowflaking, is obviously a play on words from the snowball concept.
But – can you snowflake without the debt snowball? And the answer is – of course you can! Snowflaking is an idea that can be applied to any financial plan, not just a snowball approach. Using small extra amounts of money to further your financial goals can be applied not only to debt reduction, but to savings, investing, and any other financial priority in your life. Someday I will be out of debt – but I will continue to use the idea of snowflaking to further my financial goals and dreams.
I myself do use a version of the debt snowball approach to tackle my debt reduction. I do not use the “lowest balance first” idea endorsed specifically by Ramsey, I use an interest order approach where I pay all of my extra money above the minimums to my highest interest debt. Therefore, all my snowflakes each month are applied to that highest interest debt. I recently modified my approach even further, splitting my snowflakes in half and applying half to debt reduction and half to my emergency savings. This is due to needing a larger emergency savings account for my own situation to avoid entering into more debt. Snowflaking is versatile enough to be adapted to any financial plan, budget, concept or framework and complement those goals.
With or without the snowball – anyone can snowflake. Snowflaking is a concept flexible enough to adapt to any financial framework and supercharge those financial goals. Don’t be fooled by the name – snowflaking is universal.
A few weeks ago, my spouse had his annual performance review. I am happy to report that he got an amazing review, his direct supervisor loves him, and put in for my spouse to get a 10% raise. His supervisor said that he didn’t think my spouse would get a 10% raise, because no one generally does, but he wanted to be clear he thought my spouse was outstanding so he put in for 10%. (I will mention that my spouse did get a 10% raise one year, because he is that awesome. My spouse rules.)
My spouse didn’t get the 10% raise, but he did get a 5% one which is the highest his supervisor has seen this year. His paycheck this past week was the first one to include his raise, and I was honestly just hoping that after taxes and the 401K were taken out, the raise would bring his paycheck back to what it was before we changed his 401K to from 4% to 6% earlier this year. Our budget is still based on the pre-401K change numbers, and therefore causes an extra squeeze that I’d like to do without. I was happy to see that his new biweekly paycheck was $44 more than his previous pre-401K increase one. Hurrah!
And immediately the wheels in my brain started turning. I needed to take action and figure out how to not just suck the raise into our monthly budget and never feel the benefit of having it. What to do, what to do… and then it hit me. Snowflake it of course!
So every other week, when my spouse gets paid, I will snowflake $44 to the student loan payoff fund. $44 is not a small amount of money, but it is small enough that I know if I just left it in our checking account, it would evaporate and I wouldn’t even know it was there. But $44 every two weeks makes $88 every four weeks, and that will put a little dent in the student loan every month. In 3 months, it adds up to an entire extra student loan payment.
Little changes add up to big results. This time, my spouse’s raise isn’t going to be just sucked in to lifestyle inflation. It is going to make a noticeable difference in our life. Debt – be gone!