How to Become and Remain Debt Free in 2013

by Fox Symes on January 25, 2013

Another year has passed and the previous year of paying bills may have decreased or even increased your overall debt depending on your situation. New Year’s resolutions have been established to overcome some challenges you currently encounter and you are determined to achieve them. One of those resolutions you have set is to become debt free in 2013. Therefore, we have provided some ideas to help you achieve this goal. It won’t be easy and it will take hard work and determination. However, if you are motivated to be debt free and remain [add word space] debt free, there are numerous ways to do so. You may have many of your own ideas or solutions but here are some to get you started.

Set a Strict Budget and Stick to it

This is a common method that most people will undertake to manage their finances. It is the most tactical method that will allow you to determine what your necessary expenses are and how much of your disposable income must be set aside to pay these.

Write down all of your weekly or monthly expenses (however you want to do it) and calculate the amount that MUST be set aside in order to pay these. As your expenses can’t be avoided, such as your rent or mortgage, food and transport, these must become a payment priority. Once you have determined the final amount of mandatory expenses, subtract that from your income and this amount will establish your discretionary income.

Discretionary Income

Your discretionary income equates to income after tax, minus all your mandatory expenses. This is essentially your personal income that is the remaining amount to spend at your discretion. This is where you must be careful. As this determined amount is what is ‘left over’, here is your opportunity to allocate a certain amount to your current debts or savings account. Depending on your situation you may be aiming at paying off your debts in 2013 or remaining debt free in 2013, therefore these are 2 separate methods.

Becoming Debt Free

If you are currently in debt and looking to pay those debts off, allocate as much discretionary income to your debt balances as possible. You will have a weekly or monthly amount that is already being deducted or allocated to these, however the more you can afford to allocate to those debts the faster you will become debt free.

Staying Debt Free

If you are currently deft free and looking to remain in the credit side of the bank account, allocate as much of your discretionary income to a specified savings account. If you are strong willed, you will be able to forfeit unnecessary spending on luxury items that you may normally buy. Continue to build on a positive savings account and when the time once again comes to secure a loan for a bigger purchase (E.g. car, education or house), you will have a suitable amount already established, meaning you won’t have to borrow as much and the chances of securing a loan will be greater.

As mentioned, you may have your own ideas or solutions that you will find works better for you. Begin with the budget and be as strict with your discretionary income as possible. This will steer you in the right direction to becoming and remaining debt free in 2013.

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