The Frugal Snowball

One of my favorite articles from the early days of Money360 was The Snowball Effect. In it, I took up a little nugget of an idea that I read in a back issue of the old “Tightwad Gazette” newsletter and expanded it outwards, showing how a small series of moves can transform a very small amount of money into surprisingly large financial change.

While the idea was nice, the article mostly just centered around an example that might not be all that applicable to everyone’s life, so I wanted to step back from that example and look at the idea of a frugal snowball in a more general sense, with a few examples to show how it could work in a variety of situations.

So… What’s a Frugal Snowball?

A “frugal snowball” refers to the idea that you can take the savings from a very small frugal change and apply it to a slightly bigger frugal change, then take those collective proceeds and apply it to something bigger, and keep chaining these together until you’ve drastically reduced a lot of the ongoing expenses in your life. It really illustrates the fact that small frugal steps done in a very sustainable way over time transform into something much more valuable.

Let me give you a really simple example.

Let’s say you’re currently only able to retain $10 a week after all of your expenses are covered. $10 a week is simply all you can come up with.

Rather than just directly saving that $10, you buy something you use every day in a bulk purchase, saving, say, $0.05 per use. Over the course of a week, you’re able to spend $0.35 less than before. This is because you’re now able to afford buying the bulk item every two months rather than the regular item every two weeks. Visualize, say, a box of trash bags, where you’re now buying the bulk box instead of the regular sized one, so the bags are each cheaper than before and you don’t have to buy it as often.

Now you have $10.35 each week. You look around for another item you can move to buying in bulk, and there are a lot of options. Each one might start saving you a quarter a week or fifty cents a week, but if you’re using that extra $10 ( the savings from your previous changes) to buy more and more and more things in bulk, you’re eventually looking at $25 or $30 or $40 a week.

With that money, perhaps you can afford things like a longer term bus pass, one that pays for your rides for a month rather than a week but effectively saves you about 25% on your bus fares per week overall. That might save you $2 per week.

It builds and builds and builds like this. Perhaps you can buy an internet router after saving for a few weeks and can tell your internet provider to take back their router and trim $10 off of your monthly bill. Perhaps you’ll be able to afford to switch to making an annual payment for your homeowners insurance instead of monthly payments because of this extra money accumulated from frugality, saving you $5 a week for the next year.

Eventually, you’re looking at $100 or $200 or more per week without changing your lifestyle in any way, and it’s all because of accumulated frugality, using the savings from little moves to make slightly bigger cost-saving changes, then slightly bigger ones, and bigger ones, just like a snowball rolling down the mountain accumulating more and more snow and growing bigger and bigger.

As you can see, a frugal snowball is really simple to execute. It basically just requires the ability to identify a way to save money in your life – preferably one that doesn’t have a real negative impact in terms of time or enjoyment – and following through, then applying the proceeds to another tactic. It’s easy and almost anyone can find room for these kinds of moves in their life.

Sounds Great! What Are the Drawbacks?

While building a “frugal snowball” is a really powerful idea, it’s not a perfect financial solution for everyone.

First of all, it assumes that there are plenty of unrealized options for frugality in a person’s life. A person that already pushes their frugal choices might not have many more options to make further cuts. A “frugal snowball” works best for someone who is currently living paycheck to paycheck and has only tried frugal things in the past in a fairly inconsistent way.

Second, it also assume you have – or can get – a strong grip on your spending. Without a strong grip on your spending, the benefits of a frugal snowball, especially early on, just becomes absorbed by incidental spending. If you’re spending a dollar less a week but then decide, on the spur of the moment, to buy a candy bar or a soda each week, then you’re right back where you started. You’re not gaining ground.

Finally, it doesn’t produce dramatic change overnight. It takes a while for the impact of this to appear in your life. As opposed to, say, selling off everything in your closet, which will generate a bunch of funds right away, this is a strategy that won’t really see dividends for a while.

A Concrete Example of Nine Months

To really spell out how this works, I’m going to use a concrete example using exact dollars and cents that I find online. I’m going to stick with prices from major retailers like Target, Amazon, and Walmart.

Let’s assume, at the start, that you have exactly $10 in sur per month to spend to get this snowball rolling.

Month 1 You normally buy a 50 count box of Glad trash bags for $11.99. You decide instead to buy a 120 count box of store brand trash bags for $15.99. That eats up $4 of your savings in order to bump yourself up to consistently buying the bulk store brand bags, but the store brand bags now are only costing you $0.13 a pop compared to the $0.24 a pop from the smaller name brand box, saving you $0.11 per trash bag use. If you use a new trash bag every other day, then this is now saving you $1.65 per month going forward.

You have $6 left, so you also move up from buying the 64 load bottle of Tide for $11.99 to the 96 load bottle of store brand laundry detergent for $12.99, costing $1 more. That’s a move from $0.19 to $0.14 per load. Assuming you do two loads of laundry per week, that adds up to $0.45 per month going forward.

You now have $5 left, so you buy a two pack of body wash for $5.99 instead of your normal single $3.49 bottle, costing you $2.50 but, because you go through about a bottle a month, saving you $0.51 a month going forward.

You decide to carry forward that extra $2.50 to next month.

Month 2: You save $10 again this month for your snowball, but you’re now spending $2.61 less a month, so you actually have $12.61. You have an extra $2.50 from last month, too, so you have $15.11 to contribute to your growing snowball.

This month, you keep your focus on moving to bulk buying household products, starting with switching from an 1800 sheet package of toilet paper for $7.39 to an 8712 sheet package of toilet paper for $12.99, with the switch costing you $5.60 of your monthly frugal snowball. You use 20 sheets per day on average, so you’re moving from a daily cost of $0.08 to a daily cost of $0.03 for toilet paper, saving you $1.50 a month going forward

You have $9.51 left, so you switch from a single 3.5 ounce package of your toothpaste for $2.99 to a three pack of 4.8 ounce tubes of the same toothpaste for $9.99. Your old tubes lasted for six weeks, so the new tubes last for a little over eight, meaning the full pack lasts for 25 weeks. In terms of dollars and cents, this saves you about $0.43 per month going forward.

You carry the remaining $2.51 forward to next month.

Month 3: You’re still putting $10 into the snowball, but last month you started saving $2.61 less a month, and this month you’re spending $1.93 less a month, so your total new money to work with is $14.54. Add in the $2.51 left over from last month, and you have $17.05 to work with.

You use AA batteries occasionally, so you buy a battery recharger and 4 AA rechargeable batteries for $16.99, eating up all but $0.06 of your money (we’ll assume you dropped this in the Salvation Army kettle and not worry about it). The energy use for this is negligible, but you typically needed about 2 AAs a month and this drops that down to about 1 AA a month. You normally buy a 4 pack of batteries for $7.99 when you need one every other month, but now that’s every four months. You’re saving $2 a month going forward.

Month 4: You’re now saving $16.54 a month, which is the $14.54 from last month the $2 in additional savings.

You buy another four pack of those batteries for $11.54, saving you another $2 a month going forward.

You have $5 left. It’s summer now. Most summers, you go through two of the small bottles of sunscreen at $8.99 apiece, but now you can buy a three pack for $13.99. Since a single bottle lasts you about six months, buying these jumbo packs saves you $0.72 a month going forward.

Month 5: You’re now saving $19.26 a month, which is the $16.54 from last month the $2.72 in additional savings. You decide to wait a month here and make a big purchase next month.

Month 6: You’re now saving $19.26 a month, and you spent none of it last month, so now you have $38.52.

You take the subway to work every day and it costs $2.75 each way, adding up to $5.50 a day, or $27.50 for a work week. You usually ride it twice round trip on the weekend, too, so you spend $38.50 a week on the subway. Instead of paying your $2.75 that morning for a single ride, you add $30.75 to it and buy a 7 day unlimited pass for $33. You can now keep your normal subway money and buy 7 day passes going forward, which will save you $23.89 a month going forward.

You hold onto the extra $7.77.

Month 7: You’re now saving $43.15 a month, which is the $19.26 from last month your additional $23.89 a month in savings. You also have an extra $7.77, giving you a total of $50.92 this month.

You take your lunch to work in your backpack each day, so you decide to ditch the Ziploc baggies you used to use and buy a set of five meal storage containers for $27.49 to take your meals in. You usually take a sandwich or soup or pasta or a salad, so this works perfectly. You used to buy two month’s worth of meal bags for $5.29, but now you never need them again, so you’re saving $2.64 a month going forward.

You have $23.43 left over for next month.

Month 8: You’re now saving $45.79 a month, which is the $43.15 from last month your additional $2.64 in savings. You also have $23.43 left over, so you have a total of $69.22 for this month.

You eat at home most of the time and take food with you whenever you leave, but probably three times a week you’re running late and get tempted into eating something at a restaurant on your walk home from the subway, spending an average of $10 but with leftovers for lunch the next day. If you had a meal waiting for you at home, you’d skip it, but you don’t like frozen meals very much and you don’t have much freezer space.

Your solution? You buy a Crock Pot for $49.99. You can make a big meal in a crock pot that will cover four meals for $10, saving you $2.50 per meal, and if you do that twice a week, that’s $20 per week saved in food costs. All you do different is throw some stuff in the crock pot on Mondays and Wednesdays before work (you still eat out on Fridays) and you save $86.67 a month going forward. The only real habit you’ve changed is dumping some food in the slow cooker and turning it on twice a week.

You have $19.23 left over for next month.

Month 9: You’re now saving $132.46 a month, which is the $45.79 from last month your additional $86.62 in savings. You also have $19.23 left over, so you have a total of $151.69 for this month.

Instead of buying a subway 7 day unlimited pass for $33, you can now afford a 30 day unlimited pass for $127. This saves you $14.43 per month going forward.

You use almost the entire remaining money to buy a Costco annual membership for $60. This doesn’t directly save money, but it allows you to start buying bulk household supplies at an even lower price and save on a lot of food items.

The future? You’re now saving just shy of $150 a month because of your frugal snowball and you have a Costco membership for the next year which is going to reduce some of your ordinary spending even more.

What can you do with that? You can start making a $150 a month extra student loan payment. You can start contributing to the 401(k) at work as long as the take-home pay reduction is less than $150 a month. You can save for pretty much any goal you can imagine. The possibilities are endless.

Growing Your Frugal Snowball

A frugal snowball works pretty simply. You start off with a tiny amount you’re able to save each month – $10 or $20. You look to invest that money in something that will reduce your spending going forward, and then you take that reduced spending and add it to the amount you can save each month.

There are many, many ways to go about this. The exact money saving techniques depend on your specific situation. Here are some techniques that work as you grow your snowball, however.

Tiny snowball (less than $20 cost): Switch to a bulk container of a nonperishable item, switch to a store brand version of an item, cheap reusable meal containers, rechargeable batteries, LED light bulbs

Little snowball ($20-$50 cost): Sturdy reusable meal containers, a small slow cooker, a weekly metro card, a programmable thermostat, an over-the-air antenna (leading to ditching cable)

Big snowball ($50-$100 cost): warehouse club annual membership, monthly metro card in some cities, a large slow cooker

Giant snowball ($100 and above cost): monthly metro card in some cities, annual insurance payments, annual property tax payments (if there’s a discount)

Final Thoughts

The beauty of the frugal snowball is that it can start with just a tiny bit of money – $10 a month that you’re willing to invest in frugality – and quickly grow from there as each thing you use that frugal snowball for generates more savings. Eventually, the savings grow into the hundreds of dollars per month, as you saw in the example above, and you can then take that monthly money and apply it to life-changing things like rapidly paying down your student loan debt, saving for a down payment, or paying off credit cards.

Most of these changes are things that make no difference in terms of your quality of life or perhaps even bolster it slightly. You want to aim for things that are largely invisible, like simple life substitutions that don’t really disrupt your habits.

The key is to be careful with your money and not let any savings from frugality turn into incidental spending. It’s really easy to see an extra $3 a month that you’re seeing in the first few weeks or months of this just get absorbed into an extra restaurant meal or a snack or something else completely forgettable. The key is to build into bigger and bigger up front investments in the ordinary routines of your life so that your expenses start to shrink and you can do something powerful with that money.

The rest of the story is up to you.

Good luck!

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