One Dollar at A Time: The Debt Snowflake
Here’s a helpful tool for paying down your debt that turns one big decision into lots of tiny ones…
Once you’ve made the hard decision to start paying down your debt, you’ll find yourself faced with an even more difficult decision: how to actually do it. Paying down your debt is like pulling off a heist, in order to succeed you are going to need a plan. (You won’t need a getaway driver, though. That’s a very heist-specific requirement.)
Snowball vs. Avalanche
There are two great methods for paying down your debt. The first is called the Debt Snowball. It involves paying off your lowest balances first and working your way up to the largest ones. The other method is called the Debt Avalanche, which prioritizes paying off your highest interest rate first and working your way down to the lowest.
Then there’s the Debt Snowflake. It isn’t so much for paying off debt as it is a helpful supplement whichever plan you pick, like the Robin to the Debt Snowflake’s Batman or the bass player in literally any band.
Every Little Bit Helps
Anytime you spend money, you are making a choice. You decide to spend $3.00 on a cup of coffee or you decide to spend $20.00 on a cab instead of $2.50 for the train. And whenever you decide not to spend money, you are also making a choice. The Debt Snowflake consists of taking the money you decided not to spend, and instantly using it to pay down your debt.
When you save $4.00 by not stopping at Starbucks on your way to work, that’s a $4.00 snowflake. When you walk home instead of taking the bus, saving yourself $2.50 in fare, that’s a $2.50 snowflake. When you opt for a regular haircut instead of a full cut and color, that’s a big honking $75.00 snowflake. Every day, we encounter lots of possible snowflakes: small expenditures that we can put to better use.
It’s important to keep track of your snowflakes, as it’s all too easy to spend that money on something else. If you have mobile banking, try transferring the money instantly; just be sure to look into your bank’s daily transaction limit. You could also write down all of your snowflakes on a notepad and tally them up every week, or even every day. Figure out what’s best for you.
Mind Over Matter
The benefits of the snowflakes are mostly psychological; if you’ve budgeted properly then a lot of these expenditures have already been cut. Then again, the mental side of maintaining your finances is just as important as the actual dollars and cents. Once you’ve made a debt plan, give it a try. Whether it’s a snowball or an avalanche, all you need to get started is a single snowflake.
Daily habits can have a massive impact on your finances. But if you’re facing a larger need or a more long term challenge, an installment loan could be a safe and strategic decision that can also improve your credit. Contact OppLoans and our Loan Advocates will answer your questions and help you get your OppLoan today.