Snowflaking Your Way to An Emergency Fund

I just read a post by Laura over at No More Spending called Never reaching my emergency fund goal. Like many people, I’ve struggled with putting together an adequate emergency fund. The decision often centers around a choice between paying off debt and saving for an emergency fund. The argument I’ve experienced and seen shared most often is that it’s hard to keep money in your bank account knowing that you have debt out there accumulating interest. So instead of building up your emergency fund, most people just continue to pay off the debt.

The problem with this approach is that if you do have an emergency – and you will, we all do – you will have to rely on your credit to cover the emergency costs. So if your refrigerator breaks or your car dies, you’re left with no other options and will end up paying interest on those emergency expenses.

So why not try a different approach.  This worked for me and may do the trick to get you over the emergency fund hump as well.

There’s a technique used for paying off debt which shares an aspect of the debt snowball approach called snowflaking. Snowflaking involves using small windfalls from smaller streams of income, outside of your main income like your salary, to make additional payments against your debt. For example, you could sell some stuff on eBay or craigslist, work some extra hours, find a way to save money on a current bill, or do some freelance work on the side and then use that extra income as an additional payment on your debts.

But if you don’t have an emergency fund – why not try snowflaking and build one! Put the extra cash you earn from those smaller income streams into a savings account and you’ll build up your emergency fund. Then once you have your emergency fund you can turn your snowflaking back towards your debt and keep it going. After all snowflaking is supposed to be extra effort to get ahead. So put that extra effort into being prepared and you won’t suffer financially when an emergency comes up.

I’ve done this myself and found it worked great. I’ve been doing some freelance work and my wife and I have been selling things we don’t need or use on eBay. We’ve built up enough to cover some additional car expenses that came up at the end of the year and we still have enough for a decent emergency fund. We’re not finished yet, but we’re on our way. So as we gain extra income, we’ll build our little piece of mind and when the next emergency comes along we’ll be prepared. Try it – it may be enough to give you some piece of mind too.

photo credit: *PaysImaginaire*

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Tagged as: challenge, debt, money management, saving money, Thrifty Tips

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