Debt-free is a big word, and not all of us are ready to be identified with it. Living a debt-free life means living honestly. It requires you to be honest with yourself about what you can afford, and what is just vanity. The debt-free process is confrontational, controversial, and unrelenting. It's like the mean, older brother of debt, who is passive, popular, and sympathetic. Debt only tells you what you want to hear, and it will let you go as far as you want to go, unrestrained.

Before you can start the process of being debt-free, you must acknowledge that debt is an enabler. Personify it, as I have. If debt were a real person in your life, it would be the bad, yet addictive, friend who leads you to the depths of disasters over and over again, until you have nothing left. Not a very good friend, and yet so many of us hang out with him, and think it's cool because at first, we have the newest car, and the best clothes, and the finest house on the block. It's not until later we realize we have nothing left, that all the money is tapped out, and we're borrowing from Peter to pay Paul. Or hit rock bottom completely, and lose everything.

Most Americans are two paychecks away from homelessness. This is because most of us live paycheck to paycheck. It's also because we live above our means. We buy our wants and beg our needs. There is a heavy sense of entitlement in our country that cannot be denied, but the more we get the poorer we are, digging ourselves further into debt, and helplessness.

But that's all the past! It's a new year, and you are able to change. 

Here are 10 fool pool ways to be debt-free by next year this time. Here's a caveat though: if you're expecting me to discuss 401ks and Roth IRAs and compound interest in this blog, then you should know that I don't do that. I don't really get into all that sticky stuff, and have shied away from percentages since Ms. Anderson's math class. What I understand is dollars and cents, and how to create a balanced household. I hope you find this simple system valuable to your efforts.

1. Organize Your Finances

This is big boy and big girl time. Looking at your income and expenses with an honest and open mind is tough work. You may feel overwhelmed by the amount of money you're spending. Invariably, you'll be tempted to make excuses for your behavior. Don't. Accept the fact that this is where you are, as a result of blind choices you've made, and appreciate the fact that you are now looking at your choices with both eyes open. Looking at your financial choices will definitely make you more powerful, and give you the power to rule them, instead of them ruling you.

There are different programs available that allow you to manage your finances. I suggest Mint.com, which is free and online, i.e. accessible from anywhere with an internet connection, including your phone. Mint manages your personal budget, including your fixed expenses, and your bank and credit card balances. It also keeps up with your monthly expense trends.

Start inputting everything that you spend now. Don't try to be idealistic, yet. Realistic is the key to making this work. Include everything, down to how much you spend on the Burger King drive-through very month. This is the hardest step, but the most necessary.

2. Need vs. Want

After you've organized your monthly expenditures, start editing it. What is necessary? What is superfluous? It's hard, because we do think we need everything, to live a comfortable life, but that's simply not true. A hundred years ago, no one had a television, and still lived meaningful lives. Of course, that example is just an example, because I, for one, still keep my cable television, but I do give up on other things that are not essentials. Things like going to the movies. For the price of two movie tickets, I have a Netflix subscription instead, and can see 20x the movies I would've normally. Yes, it may take me a little longer to see it, but I'll still see it. Isn't that the point? Sometimes you have to challenge yourself about what is really important to you, and what you're willing to sacrifice to keep it. 

It's not necessary to give up all of your wants, because then life will be utterly depressing, and you'll feel tempted to return to your previous ways. The best way to edit out things is by giving it a test run. If you think your cable bill is too expensive, then avoid watching cable for a few days, and see how you fare. Do the same thing with your morning coffee, or your take-out lunch. Make your own coffee, or lunch, and see how it feels. You may like it, and you'll definitely feel proud of yourself.

3. Cash

Dave Ramsey has a wonderful envelope system that has worked fabulously for my family. Basically, you cash your paycheck, and separate the money into different marked envelopes. The envelopes are marked by your monthly expenses, like rent or mortgage, utility bills, groceries, and entertainment. You predetermine what you will spend at the beginning of the month, and if you've depleted your envelope, you're done. 

The thing about cash is that you have an emotional attachment to it. It's more tangible than transferring funds from one invisible location to another, like you do with debit or credit cards. Each dollar means something, and you're more inclined to be responsible with the money in your pocket than the money you can't see.

So, spend cash for everything. But do keep some money in the bank. This is for your emergency fund, which we'll discuss a little bit later.

4. Look at Your Credit Report

Once every 12 months, you can look at your credit report from the three main credit agencies, which are Equifax, TransUnion, and Experien. It's important to know how much debt you have accumulated, and what may be holding you back. Just because a creditor isn't calling your house doesn't mean that you've dodged that bullet. Most likely, they reported your debt to one of these credit agencies. And these credit agencies directly affect how potential creditors will view you. 

It's also handy to look at these reports to track your pattern of spending. What do you buy? Look at it with a cold eye. Once again, don't employ excuses. 

5. Confront Your Demons

Or debt collectors. Whatever you'd like to call them. The debt collectors aren't really evil (unless their phone calls are waking your baby up in the middle of nap time, and then they are an abomination from hell). They just want their money. You may be surprised how flexible they will be with you if you take the time to call them and make a deal. Honestly, you're getting the better end of the deal, because you'll probably pay much less than you originally owed. And it's worth the peace of mind. 

The next time a debt collector calls, answer the phone. And be honest with them about how much you can pay. If they don't accept it, then you can hang up the phone, but it's good to try. And start putting away money from them, anyway, on the side. They may not accept your payment terms initially, but after you've amassed a decent amount, you can call them again and ask for a deal, and tell them what you're willing to offer. 

By all means, don't ignore them. They will help you to restore your credit, because debt collectors report payment to the major credit bureaus, which is good news for you.

6. Use Your Tax Refund For Something Meaningful

Oh yes, I know that a trip to Hawaii may seem like a meaningful use of of your tax refund, but I submit to you that it would be more useful when directed toward your debts. You must own your debts, and come to view them as your choice, and not a burden placed upon you by mean, unforgiving corporations. Using your tax refund to pay down your debts is not a punishment. It's fulfilling the obligation you made to others. 

7. Downsize Your Life

This one is hard, and it goes hand in hand with step 2, about comparing your wants to your needs. You don't need to live as richly as you do. You may think you're barely scraping by, but those of us in America who make minimum wage (average $6/per hour) are considered part of the 12% richest people in the world. That's definitely sobering. Go to GlobalRichList.com to see exactly where you measure on the list. The majority of the world makes less than $6 a day. 

Yes, we do have to account for inflation, but think of how poor you would actually be if you saved a year's salary, and moved abroad for a year, living solely on those savings. I'm not suggesting that, but I am saying that we were richer than we think, even without all the accessories of wealth. You don't have to go from Dior to drug store, but how about going to eBay? or Craigslist? It doesn't have to be directly off of the rack, you can buy second-hand items and still be fabulous.

Along those lines, think about downsizing your car or house. If you can't afford it, some digging yourself deeper into debt. Buy something you can afford. Buy a used car. Get a house in a different neighborhood. Wealth isn't about having glitzy things, it's about having a full supply. 

8. Build an Emergency Fund

As alluded to earlier, it's so crucial to have some money put away for a rainy day. It's the wisdom of the ages. Sometimes, life can surprise us with things we never expected: a job loss, an unexpected pregnancy, the death of a loved one. We need something to buffer the blow. Start portioning out a part of your monthly income to an emergency fund. It's good to have at least $2000 in that fund, and that's a good goal to set by year end. You don't need to immediately dump $2000 into this fund, but increase it steadily. Allot about $40 each week to your emergency fund. It's doable. Think of all those $5 Burger King lunches. If you eat out 5 times a week, you can use that money toward your emergency fund, and you're already over half way there. 

9. Start Marketing Your Talent

If you have one job, add another one. You can start freelancing on the side. Perhaps you can sell items over eBay, or write short stories that people would like to read, or babysit, or design websites. Whatever your talent, market it, make it work for you. I emphasize talent, because you should only do what you would do for free. This way you won't be easily deterred from continuing. If you like designing websites, for example, you'll consider getting paid to do it a benefit, instead of like a job. 

Your job may already be utilizing your talent, but they don't hold exclusive rights to it. One thing we can learn from the rich is how they diversify their income. Oprah has a TV show, a magazine, a movie company, and I'm pretty sure she's debt-free. You may not be Oprah to have different avenues of income. 

10. Plan for the Future

A gloomy fact for my generation is that we will probably never see Social Security. It is expected to end by the year 2040. It's a fact that we should plan for retirement. Start by expanding your emergency fund, and keep that fund at a minimum of $2000, once you build it up to that point. Of course, I should discuss 401ks, but I said I wasn't going to do that, because it's too sticky for me. If you're not into investing in stocks, definitely invest in yourself. 

Become a owner. Own your land, because that's one thing that doesn't easily lose value. Own your car, even though it does lose value.