“Snowballing” your debt is a phrase a lot of personal finance bloggers use to describe the idea of paying off your smallest debts first so you can benefit from having quick wins in seeing your debts go down. One win leads to another, and soon you are shedding debt like a snowball rolling down a ski slope. Coined by the popular get-out-of-debt guru David Ramsay, debt snowballing means essentially ignoring higher interest debt in favor of reducing the number of outstanding debts, starting with the smallest and working your way up to the largest. Ramsey writes: “personal finance is 20% head knowledge and 80% behavior.You need some quick wins in order to stay pumped enough to get out of debt completely.”

A contrasting school of thought holds that you should always start with your highest interest debt, such as high interest credit card debt. If you want to experiment with how this would work, download and use the free Debt Reduction Calculator, in Excel format, by Vertex42.

How to Curb Your Spending

Less discussed is the Spending Reduction Snowball. It was Ben Franklin who coined the phrase, “watch your pennies, and the dollars will take care of themselves.” Rather than cut out the big spending items–either because you can’t (e.g., mortgage payment, car payment) or you can’t bring yourself to do it (e.g., that trip to Hawaii), snowballing your spending habits in the downwards direction might mean passing up Starbucks in favor of brewing your own, darning your socks instead of throwing them out and buying new ones. Knocking back your cable subscription to basic.

Of course, unlike debt, you may not have an easy way to add up all of your spending. But just as the spreadsheet above works, you can easily calculate these small savings by projecting the savings out a month or a year. For instance, if you cut your cable bill by $15 a month, project your savings out a year $15 x 12 months = $180, and you’ll rightly multiply the effect of the sacrifice to put it in its proper perspective.

Or bring a notepad with you and jot down every penny you save per item when you reach for your usual brand, and then either go generic or pass it up all together. Who wouldn’t bask in the glow of passing through the check out and then realizing that you just saved $34 by shopping more frugally?

What else can you “snowball?” How about your e-mail in-box? We’ll save that for another post.