Tuesday, August 14, 2007

Innovation is a wonderful thing

So, have you heard of this thing called a "snowball"?

Of course you have. Next to the Emergency Fund, it's probably the most discussed financial tool in the PF blogosphere. For the uninitiated, here's the gist:
  1. Pay the minimum amount on all but one of your debts; attack this last debt with all your extra cash.

  2. Once the first debt is completely paid off, take all the "extra" that was previously going toward that debt, and apply it to the next debt in line, continuing to pay the minimums on the others.

  3. Repeat.
There's lots of discussion about how to choose which debt to attack first, but that's the basic idea. This is called a snowball because of the way the process accelerates as each subsequent debt is knocked off; it's like a snowball rolling down a mountain, growing bigger and faster the longer it rolls. This idea is discussed daily and at length by PF bloggers, and there are calculators to help decide how to design your own snowball technique. There's really very little that I could add to a discussion on snowballing debts.

However, there's a really cool off-shoot of this technique, which I found over at I've Paid For This Twice Already... (a great blog). The idea is to make additional "snowflake" payments to debt whenever possible. I love the approach used by this blogger, and I love the addition to the snowball metaphor.

Just an example of how constantly impressed I am by the ingenuity and creativity of the PF community. Keep up the good work!

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