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Snowflakes and Avalanches
By Jay | December 30, 2007
One of the great things about being on vacation is that I have had time to look at what a lot of other people are doing on the blogosphere when it comes to personal finance and paying down debt. I never knew there was so much good information out there, and so many people in the same boat that I’m in.
I read a good article over at I’ve Paid for this Twice Already called The Snowflake Revolution. The idea behind this article is that we should think of the small payments we make above the minimum payment on our credit cards as “debt snowflakes.” What is a snowball made of? Snowflakes. Thus, making small debt payments will quickly snowball into bigger payments.
I currently owe about $47,000 on my credit cards. I haven’t been writing much about this lately because my yearly bonus was going to take care of a good chunk of the debt, and my partner was planning to sell some property in Brazil and would pay the $15,000 that he owes me out of his profit, which along with my share of the investment — $25,000 — would take care of the rest and then some.
But I’ve since decided to plow as much of my bonus as possible into my 401K plan. Once this is done I will have about $8,000 left to pay toward my cards. And we’ve decided to hold onto the land in Brazil. It has doubled in value in the past three years, as has the Brazil currency, so our initial $12,000 investment is worth almost $50,000, and looks like it will go up further. Almost all of my debt is at zero percent, so I believe it makes more financial sense to do it this way.
So I’m planning to go hardcore with my budgeting and pay off the rest of the debt with as many little snowflakes as possible by the end of this coming year. I’ll keep monthly track of my progress in my blog.
The debt snowflake concept makes a lot of sense to me. I’ve always found that it is the little things that make the biggest difference financially. I have been using every extra cent to pay debt over the past three months and am already down by $2,398.
Of course the snowflake concept works in the other direction, too. (How do you think I got all that credit card debt in the first place?!) If you spend $3 per day for your Starbucks Latte, you are spending $21 per week, or $84 per month. That comes out to $1,000 per year. Ouch. And if you’re paying 18% interest on a pile of debt, you have a big avalanche headed right over a cliff hanging above you!
One more image to remind me to stick to my budget!
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Stumble it!
December 31st, 2007 at 11:45 pm
Glad the concept appealed to you. in reverse is a lot of how I got into debt in the first place ;)
Good luck!