04/08/2014 11:18 am ET Updated Jun 08, 2014

4 Ways to Get Your Debt Snowball Rolling

Having a plan to pay off debt is one thing. Setting that plan into motion is a whole different ballgame. Arguably the best approach to getting out of debt is called the debt snowball.

Here's how a debt snowball works:

  1. List your debts in the order you'll pay them off.
  2. Pay the monthly minimums on all of your debts.
  3. Throw any extra money at the smallest debt.
  4. Once you've paid off that debt, put the minimum payment you were paying on it and any extra money into the next debt.
  5. Once you've paid off the second debt, put both minimum payments plus extra money on the third.
  6. Repeat until you are debt free.

The debt snowball works because you pay more than just the minimum payments each month. The result is getting out of debt faster and with less paid in interest.

You can structure your debt snowball in different ways. The most mathematically sensible option is to pay your highest interest rate debts first. This will save you money in interest and get you out of debt the fastest.

Another option (perhaps the more well-known) is to pay your debts from smallest to largest. This option can give you a psychological boost. You gain a quick victory over that pesky $500 medical bill, and you're more likely to stay on track.

Of course, all this assumes that you've got some extra money to start paying down that first debt. But what if you're already living paycheck-to-paycheck and can't find spare change hiding in the couch cushions?

If this is your situation, here are four ways to get your debt snowball rolling:

1. Lower your bills. Before you try to exist on Ramen just to cut down your grocery bill, look for ways to save on recurring bills. It's more effective to cut down bills like cable, cell phones, Internet, and insurance. This option results in month-after-month savings with very little effort.

Start by checking out your list of monthly bills, and try tackling the most expensive first. If, for instance, you're paying a fortune for your cell phone plan, shop other options. Increased competition means many companies are offering excellent deals for new customers.

Or, find ways to cut back spending with your current provider. Drop the data. Downgrade to a cheaper phone. Or move away from your unlimited everything plan to a more limited plan that still meets your needs.

As you lower your monthly bills, keep track of exactly how much you're saving. Whether it's $5 on your Internet bill or $50 on your car insurance, that money needs to go back to debt payoff -- not towards unnecessary spending.

2. Sell some stuff. Chances are likely that you've got some stuff sitting around your home. Stuff you don't need or use. Probably some stuff you don't even want.

Instead of letting it collect dust, take time to sell this stuff. Craigslist is a great place to sell unwanted furniture and appliances -- items that would cost more to ship than they're worth. And for smaller or higher-end items (especially collectibles), try eBay. Or take gently-used clothing and toys to local consignment shops.

Man vs. Debt guest poster Jenny Newcomer paid off $15,000 in student loans in nine months by selling stuff on eBay. But even if you make nowhere near this amount, an extra few hundred bucks can get you started on your snowball.

3. Start a side gig. So many jobs and businesses out there can bring in extra money on the side while you still work your day job. Start a blog. Deliver pizzas. Wait tables on the weekends. Consult on an hourly basis in your own field of expertise. Babysit on Friday nights.

Stephanie Hood is just one example of the power of the odd job. She used babysitting, paid focus groups, and odd jobs on Craigslist to help pay her $90,000 in student loan debt.

Bottom line: do what it takes. Even an extra $50 a week (which you can make in no time) makes a difference as you get your debt snowball rolling.

4. Reduce your interest rates One oft-overlooked way to pay down debt involves refinancing. Getting a better rate on your car loan or credit card debt can make a huge impact on your get-out-of-debt plan.

Virtually any debt can be refinanced. Whether you are dealing with a mortgage, home equity line, car loan, or even credit card debt, check to see if a lower interest rate is available. Credit cards are arguably the easiest to refinance, as there are plenty of 0 percent deals to be found. By lowering the rates, you free up more cash to put toward the balance of your loans.

It's Okay to Start Small

When it comes to paying off debt, many people think in terms of "go big or go home." But that's just not how it works -- especially if you're already struggling financially.

You can pay off debt a little at a time. You just need a plan and a way to get started. Any of these four options can give you some cash to get your snowball rolling. And as soon as you start paying off those small debts, your payment snowball will grow. Once you get to the biggest debt on your list, you'll smash through it in no time flat.

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