It might seem counterintuitive in balmy Florida, but the key to paying off debt might be snow. Yes, that cold white stuff that falls from the sky. In this blog, we are going to explore three methods of paying off debt; the snowflake method, the snowball method, and the avalanche method. In my opinion, these are not separate methods, but interconnected methods and can be used interchangeably. Of course, using these methods takes strategy – you are in this for the long haul and you are going to pay down that debt all the way to zero.
Let’s take a look at what the snowflake, snowball, and avalanche methods in detail and how you can progress into paying off debt.
The avalanche method is designed to pay down the highest interest debt. The highest interest that may not be the highest balance. For instance, if one has a credit card with a $5000 balance at 15% APR and an automobile loan at $7500 at 3% APR, using the avalanche method one would pay down the credit card balance first. The method entails making minimum payments on all other debts while still covering regular expenses, then using any leftover cash to pay down the higher interest balance. This method takes time and patience and can be frustrating when you want to see quick results. However, it does save hundreds or even thousands of dollars in interest charges.
This method has a big online following, and even some science to back it up as an effective method for paying down overall debt. The snowball method emphasizes “small victories” by paying down the smallest debts first. As with the avalanche method, start by making the minimum payments on all of your debts and covering your monthly expenses, then allocate any leftover resources to knocking down the smallest debt.
Let’s say that you have a pretty good pile of debts. The smallest is a balance on your Walmart store card of $1600. A Target card has a balance of $2000. Next up, there’s a Visa card with a balance of $2500. Then there is another Visa card with $5000. Finally, you loaded up one Mastercard to the tune of $8500 by transferring balances from the other two credit cards. On top of that, there is an automobile loan for $9000. Your student loan balance is $35,000.
Using the snowball method, you would make all the minimum payments on your outstanding balances, then turn around and apply any extra to the Walmart store card. Once the Walmart card is paid off, you can add that former payment to the payment you are making on the Target card plus any extra left over after you have made your minimum payments. After paying off the target card you have two former minimum payments from retired debts to roll into the Visa card with the balance of $2500. As you can see rolling over the former minimum payments creates a snowball effect that can eventually translate into an avalanche.
Now that you understand avalanche and snowball methods, let’s talk about snowflakes. Avalanches and snowballs are made from snowflakes and capturing even small savings toward debt repayment can make a big difference in the end. By capturing snowflakes, it’s possible to speed up your debt-free date even more.
One of the problems with paying down debt is that a lot of us live from check to check. There isn’t a lot of room to spare when it comes to making more than the minimum payments while still meeting monthly obligations such as housing, food, utilities, transportation and other expenses. There are ways to wedge little snowflakes into your daily life, if not to apply to outstanding debt then to at least give you some extra breathing room. Here are just a few ideas for getting enough snowflakes to pack into a reasonable snowball.
1. The humble change jar. Just pick out a container and at the end of every week dump all of your change into the jar. It’s also okay to add dollar bills and coins, or even to Chuck in the occasional five-dollar bill.
2. Start brown bagging your lunch. Do your food prep and cooking on the weekend, and simply throw it in a bag and take to work. This cuts down on running around during your lunch hour or having food delivered. If you were thinking of getting started on clean eating or keto, this is a perfect way to eliminate the temptation of fast food. “No thanks! I brought my lunch today.”
3. Get a gig. Gigs don’t have to be an extra full-time or even part-time job. Gigs can just be jobs where you pick up money here and there. For instance, freelance writing, babysitting, housesitting, pet care, or handyman services. Of course, many people drive for rideshare services such as Uber or Lyft, freelance on services like Task Rabbit, do personal shopping, or deliver for services such as GrubHub, InstaCart, and Postmates.
4. Have a yard sale. Sell off stuff that you haven’t used in a while. This can be clothing, video games, even furniture, or that old weight bench out in the garage that you haven’t used since 2013. If it has not been used or worn any year, then get rid of it and make some money in the process.
Sometimes paying off debt can feel as if you are trying to empty the ocean with a teaspoon. That’s perfectly okay! You didn’t get into this mess overnight and you’re not getting out of it overnight either. Sometimes you need a fresh set of eyes on a situation, and our experienced attorneys can help you with much more than filing for bankruptcy. We can help you decide which method is best suited for retiring your debt, or if there are other methods that will yield better results. Gather your paperwork and make an appointment for a free initial consultation in our West Palm Beach or Fort Lauderdale offices. We are open seven days a week and can help you figure out the best methods for paying off debt and get back to living your best life.
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