This is a great concept written about by a blogger who is working to pay down debt and free her family from financial imprisonment. She calls her blog "I've Paid For This Twice Already," in honor of those credit card purchases that rack up interest month after month, resulting in many people paying twice as much for the things they buy.

The "debt snowball" concept is promoted by Dave Ramsey, a proponent of being debt-free. That means no credit cards, no auto loans or leases, and no loans other than a modest home mortgage.

The snowball method requires you to list all your debts, either in order from lowest to highest total, or from lowest interest rate to highest interest rate. You decide how much money each month you will pay toward your debt. All accounts are paid the minimum payment, and any extra money that is to be paid on debt goes toward the debt you want to pay off first. (The one you want to pay off first will either be the one with the lowest balance or the one with the highest interest rate, depending upon the methodology you prefer.)

Suppose you decide you will pay $1,000 toward debt each month. You make all minimum payments, and have $300 left over. The extra $300 is then applied to the debt you want to pay off first.

Each month you continue this process of paying all minimums, but applying your extra debt paydown money to the single debt you want to pay off first. After you eliminate that one, you use all extra debt paydown money toward the next debt you've targeted.
The process is called snowballing because as you get rolling, you are paying more and more each month toward the targeted debt.

Now onto snowflaking. You have your monthly debt paydown money, but what about adding some extra to that? The blogger writing about her snowflaking experience looks for small ways each month to raise some extra money (little snowflakes) that are added to her monthly snowball.

She says she does surveys online, sells things on eBay, and has yard sales. I can think of a lot of other ways to make or save money, such as using coupons at the grocery store, waiting tables one night a week, or providing dog walking services.

No amount of snowflaking is too small. Something that adds $10 or $15 to your debt paydown is worth it. Each one of these little things can add up quickly. The blogger says she has averaged about $200 extra per month toward paying her debts.

It's not a new concept, but it's a great idea with a cute name that fits in well with the debt snowball concept.

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.

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