I’m not sure where I heard about of these concepts (maybe Dave Ramsey?), but I know I didn’t come up with them: the “iceberg” approach to paying off debt/saving or the “snowflake.” Have you heard of this?
Basically, if you’re more a believer in the “iceberg” method you like to seriously save on the big things (house, car, insurance, etc.) and take big chunks of money every so often to pay off debt or save, as opposed to the “snowflake” method, which is more focused on saving on all the little stuff (no more Starbucks, cook your own meals, etc.) and throwing those small savings at debt/savings. Ideally, we would all do both and to a certain extent I think most people in the PF world do. However, I also think we all fundamentally fall into one camp or another.
I do. I’m an iceberg.
I would SO much rather work more and throw large chunks of money at debt than try to scrimp on every purchase. Why? Part of it is the “pain” factor. To me, it’s a lot more painful to deny myself every day but then have extra money every month to throw at my debt than to work just a little more and end up with a BIG extra payment every so often. Also, though, it’s the I-need-instant-gratification factor. It’s not going to give me a sense of accomplishment if I see my debt go down by $100 every month for five months, but if I see my debt go down by $500 with one keystroke because I got a stipend for mentoring new teachers….that gets me excited and keeps me motivated.
That doesn’t mean I’m necessarily frivolous day-to-day; I mostly make my own coffee and meals. I use a refillable water bottle instead of buying bottles. I color my own hair and have hand-me-down furniture. But if I want to go out and buy a new pair of work pants, a book, and a vintage handbag, then a round of drinks for my friends on Saturday afternoon (true story from last Saturday) I don’t want to agonize about it. I don’t want to scrimp and get into an internal battle with myself* about spending the money. I want to happily spend a pleasant afternoon shopping and drinking because I know I have A LOT of extra money coming in soon to move me towards debt free.
In the end, you have to pick a method that works for you. The important thing is to be working towards your goals, not so much the exact route you took to get there.
So what about you? Are you a “snowflake” or an “iceberg”?
* Thanks to my expert negotiating skills, I was able to get the vintage bag for $20 instead of $24. So, even though I wasn’t battling myself, I was kinda battling the girl behind the counter 🙂