recently i came across the Carnival of Snowflaking. the site invites any blogger who specifically mentions the concept of ’snowflaking’ in his/her blog posts to submit articles to this weekly carnival. so i asked myself,

1. what is this ’snowflaking’ thing?
2. do i ’snowflake’?

before we go into ’snowflaking’, we should first visit the related idea of (debt) snowballing, a currently popular term in the debt reduction realm. from the wikipedia (i’ve changed the bullet points to numbers),

The basic steps in the debt snowball method are as follows:

1. List all debts in ascending order from smallest balance to largest.
2. This is the method’s most distinctive feature, in that the order is determined by amount owed, not the rate of interest charged. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be moved above in the list.
3. Commit to pay the minimum payment on every debt.
4. Determine how much extra can be applied towards the smallest debt.
5. Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off.
6. Note that some lenders will apply extra amounts towards the next payment; in order for the method to work the lenders need to be contacted and told that extra payments are to go directly toward principal reduction.
7. Once a debt is paid in full, add the old minimum payment (plus any extra amount available) from the first debt to the minimum payment on the second smallest debt, and apply the new sum to repaying the second smallest debt.
8. Repeat until all debts are paid in full.

In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name).

also, dave ramsey explains his concept.

now that we’ve got this notion down, let’s go back to ‘snowflaking‘.

it appears that while in snowballing, you:

“Determine how much extra can be applied towards the smallest debt.”

in snowflaking, you:

try to collect up little bits of money wherever I can and I apply those as well to my top priority debt

I apply those as well to my top priority debt as immediately as possible

according to a primer over at paidtwice.

the powerful idea behind this approach is that,

“Small efforts matter, and many little things can add up to a huge snowstorm.”

paidtwice confides that,

“I use it because of anything I’ve tried, this has kept me the most focused and deliberate about debt reduction and eliminated debt the fastest.”

so, instead of pre-determining how much extra is available to apply towards your smallest debt on top of that month’s minimum payment, you constantly apply all bits of money that one finds or earns throughout the month and immediately fork that over to the smallest debt.

i think i see. then with this in mind, the next questions are naturally,

do i debt snowball? if so, how? and, do i ’snowflake’? have i been ’snowflaking’?

snowballing

currently, i have two main sources of debt:

1. my college loans of $10,253.83
2. personal loans of $6400

each month (at least for the past several months), i have been at least paying off the minimum for both. however, i have been aggressively paying off the personal loans on top of that, such that i direct any extra money i feel comfortable handing over to that as well.

1. college loans: $307.25
2. personal loans: $330+ X = Y, where Y = 574.54 in september.

this has been happening for at least a few months.

i know that since my college loans have a low interest rate of 3-4%, i don’t really worry or stress about it. the personal loans on the other hand, have a 15.99% (ouch!).

snowflaking

recently, i received extra sources of income:

1. 2007 federal income tax refund: $998
2. 2007 economic stimulus check: $600

they both went immediately (well, a few days later) to payments for those personal loans.

although i don’t have many other recent sources to report, i am fortunate that these two resources were relatively large.

so, since i satisfied the 2 criteria for snowflaking, i believe i have been in fact, snowflaking! huzzah.

i shall go over to the snowflaking site, and see if i can’t join the snowflaking revolutionaries and submit an article for their next edition.*

how about you? have you been snowballing or snowflaking your debt ?

if so, what are your thoughts on these concepts?

if not, what is/are your debt reduction method(s) ?

*incidentally, blogcarnival.com tells me that this carnival has been discontinued.. i’ve contacted paidtwice to see if this is really true..