The Real Debt Guy suggests what you should ‘always start with’ to become debt free in 2023 | Personal Finance | Finance

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2022 has been a tough year financially for many as inflation hit a 41-year-high and Britons struggled to make ends meet amid soaring food and energy prices. The average debt per household including mortgages was £65,618 in the year leading up to September 2022. spoke to The Real Debt Guy about how people can tackle their debt in 2023.

While it’s easy to get into debt, it’s not so easy to get out of it. Oye Kanmi founded The Real Debt Guy website after finding himself in a small amount of debt even though he was on a decent salary. 

He told “Following a conversation with a friend who was trying to find solutions to tackle debt, it made me think about my credit card and how I even had debt despite earning well.

“So I dived deeper into the subject, looking into how banks work and how debt collectors work, processes and solutions etc and shared my findings with friends and family along the way which prompted them to open up about their own personal debt.

“Using the knowledge I had gathered I started to help people close to me and as more people heard about the ways I was helping, others started speaking to me about their issues.”

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Oye explained: “You should always start with your priority debts first. If you are in arrears, your focus should be to clear any arrears or discuss a strategy to do this with the creditor.

“Most financial advisors will encourage you to pay off the debts with the highest interest rate first, with regard to non-priority debts. However, if you have a zero percent interest credit card, it may seem like common sense to clear that last. You need to be aware that when the interest-free period is over, that may become your highest interest rate debt by a distance.

“Having debt is a lot more than just interest rates, it can be an emotional and mental strain. This is why it’s important to have ‘small wins’ for example you can be paying most of your money towards a debt of £10,000 because it has the highest interest rate, but if you have three other debts of £1,000, £700 and £400, it can feel depressing if none of them seem to go away.

“Clearing the £400 debt is a small win but at least you can close that chapter and feel like you’re getting somewhere.”

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Experts recommend adopting the 50-30-20 rule when it comes to budgeting, saving and paying off debt.

It means living off 50 percent of your income, putting aside 30 percent for ‘nice to haves’ or wants and putting 20 percent of your income into savings.

On an average salary of £31,461 and take home pay of £2,088 monthly, this adds up to £5,011 over the year.

That’s a chunk of money towards becoming debt free, overpaying the mortgage or a family holiday of a lifetime.

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