When I was £13,700 in debt I couldn’t afford food but I’ve nearly paid it all off – here’s how
SAVVY saver Ira Steele would barely make it halfway through the month before running out of cash for groceries because of his £13,700 debt.
But the 36-year-old small business owner who lives in Wiltshire managed to clear nearly ALL of it by overhauling his spending habits and slashing his bills.
Now he has just £288 to pay off - meaning he’s paid off £13,412 in just under 14 months.
His finances started to spiral in January 2020 when he switched jobs and took a pay cut.
He went from a £45,500 salary to £38,000.
Although that’s more than the national average, he lived in London at the time where the cost of living is more expensive.
Ira said he didn’t alter his spending after he went to a smaller salary - and started to borrow more and more money.
“What I was spending my money on - like holidays and groceries - didn’t change, the amount of money I earned did,” he said.
“I was using credit cards to top up my salary. Before I knew it, I was in a massive amount of debt, and didn’t know what to do about it.”
He owed £3,984 on his credit card, and took out a £7,500 loan from the bank.
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He had racked up a £1,233 bill on his Argos store card, and was £1,000 into his overdraft.
All in all, he owed over £13,700 in total.
Although he never defaulted on re-payments, he was sometimes late paying his lenders.
“I was worried about my credit score - my ambition is to buy my own home. It’s tough to buy as a single buyer with a bad credit score," Ira said.
But in April last year, he decided to figure out exactly how much he owed and tried to tackle his debt once and for all.
He’s not the only one who has fallen into debt and struggled to pay his bills.
A crippling cost of living crisis has seen costs from energy to food and fuel rocket, leaving families falling into the red.
One in 10 people have resorted to using Buy Now, Pay Later services to pay for essentials.
While six million households owe their energy supplier £1billion.
The first thing Ira did was face up to his debts, combing through his bills, bank accounts and statements to see exactly how much he had borrowed.
“I figured out how much I owed and why I was overspending.
“Before that I had my head in the sand, and didn’t understand why I was running out of money quickly.”
One he did that, he made a monthly budget covering the cost of his basic expenses such as bills, food and rent.
It meant he ditched any other luxuries like holidays, meals out and takeaways that he was splashing out on before.
Then he allocated extra money to pay off the debts that was causing him the most anxiety first.
Usually, experts recommend using the avalanche method.
You put enough money towards making all the minimum payments for each debt, then you pay any remaining money to the debt with the highest interest rate.
But Ira wanted to get rid of the debt that would motivate him to go onto paying the others off.
"My first debt I paid off was my credit card, then my store card," he said.
"The store card had a higher APR which should have really been the first debt to pay if I used the avalanche method, but the credit card weighed on my shoulders more.
“I repaid all my minimum repayments on all my debts - which totalled £600 a month - and then I committed £300 extra to the biggest debt.
“That meant I was paying £900 towards my debts per month.”
Slash bills
To afford putting such a high sum away towards his debt repayments, Ira had to cut his spending in other areas.
He raided his bills by downgrading service packages, shopping for better deals and cutting subscriptions.
Moving to a cheaper Sky package - from £41.73 per month to £26 - saved him £15.73.
While moving to a SIM only deal after his mobile phone contract ended meant he cut his bills from £55.19 to £15.30 - saving him £39.89.
Shopping around for better deals on his pet and car insurance helped him save £79.51.
Slashing subscriptions saved him £55 per month.
He uses the envelopes saving trick to monitor his spending on groceries and fun things like takeaways.
Ira takes out £50 in cash, and places it in an envelope - and that will last him for the week.
"If I ever eat out it comes out of the money I put aside for food shopping each week - but I do this rarely because £50 doesn’t go very far these days," he said.
The envelope savings trick can make it easier to track what you are spending, instead of racking up a big bill on your card.
Keeping to such a strict budget means Ira now has only £288 of his debt left to pay.
That means he has managed to clear £13,412 in 13 months.
He's now set up his own small business, selling money budgeting tools online to help others get out of debt too.
He makes £1,500 a month from this - and it has now become his full time job.
“It feels incredible,” Ira said.
“I’ve felt like I’ve had a weight on my shoulders all year.
“But I feel like I’m able to do anything with my life now.”
How to cut your debts too
If you're in a large amount of debt, it can be really worrying.
The first thing to do is start checking your bank balance regularly - this will help you monitor your spending.
Once you have an idea of what you're spending your money on, make a budget like Ira did, covering all your essentials.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Aim to pay off more than the minimum repayments on your credit cards, if you have any.
If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
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We also explain six ways to shrink your debts - from lightening loans to blitzing credit cards.
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