June 14, 2024
Bakery owner, on £2.8k a month, who paid off £13k of debt

In our How I Manage My Money series we aim to find out how people in the UK are spending, saving and investing money to meet their costs and achieve their goals.

This week we speak to Chinelo Awa, 36, a luxury cake making business owner, who lives in London. While in the depths of grief after losing her mother, Chinelo was in £13,000 worth of debt. Her credit score was poor. She’s now rapidly ramping up her business and is looking to boost her £10,000 pension pot. Chinelo isn’t looking to purchase her own home and is soon moving to a one-bed rental in Battersea.

Monthly budget

My income: I currently take around £34,000 from my business, Good Cake Day, annually, around £2,800 a month. The business makes around £5,000 to £10,000 a month, but this is variable.

My outgoings: Groceries, £77; mobile, £52.81; subscriptions, £45.45; money into cash savings, between £100 to £250 per month; therapy, £180; public transport, £294; charitable donation, £100; eating out, hobbies, day trips, holidays and clothes, this varies but around £55 to £170 per month.

Once I move to the rented flat in Battersea, my rent will be £1,129 per month. My council tax with a single person’s discount will be about £40.40 per month and my utility bills will be around £120 per month. Broadband will be included in the rent.

I grew up in Nigeria and my mum worked as a lawyer. Things weren’t always easy for us financially though. I attended a boarding school in Nigeria and had nowhere near as much money as the other kids. We had a beat-up old car and one of my classmates laughed at it.

I moved to the UK when I was 18 to study law at various universities. I then started working as a paralegal. I haven’t done a training contract, but I’d like to do the exam you can take and qualify. Working as a paralegal, I made around £33,000 a year.

For a long time, I was afraid of money and not having enough. I think this stems from my experiences in Nigeria. I didn’t learn about money management. After getting my first credit card to use for a subscription to The Economist, I became overdrawn and paid back the bare minimum each month, which I now know is never a good idea.

My mum became very ill in 2017 and died on 24 December 2018. I’d lost my job and my mum had been too ill to work. I had to go on benefits. I had two credit cards and took loans out. I couldn’t pay my rent and was in arrears. I ended up in £13,000 worth of debt and didn’t have the courage to check my credit score.

In the immediate aftermath of mum’s passing, I wasn’t interested in being alive any more. I could not see a future. I wasn’t expecting to be alive for much longer and just lived day to day to get by. My finances were not a priority.

Over time, however, I got help from debt charity, Step Change, to help me start paying off my debts. I managed to get a job near Canary Wharf and finally checked my credit rating. It was poor. Aside from dealing with a pandemic, I was trying to cope with grief and simply survive.

Last year, I watched a show on Netflix called How to Get Rich, featuring Ramit Sethi. The show went through the basics of how money works and I started to understand that I needed to pay off my debts and get a good credit score. I needed to be aggressive about it.

I was paying off my debts slowly, but realised I needed to increase the repayments significantly. I set up an account with Experian so I could analyse my credit score in detail. Paying my debts off became a priority and I cleared them all in December 2023. It was the best feeling.

I now understand that if your credit limit usage is over 75 per cent, your credit score can be affected. So, I’m working to reduce my spending on my credit card. In April this year my credit rating was excellent, which I was very happy about. It didn’t happen by accident.

I set up my business, Good Cake Day, in 2016 and started trading in 2017. I went full-time with it during the pandemic. We make stylish cakes and brownies for celebrations. I’d always been artistic and spent a lot of time learning how to make cakes taste good and how to decorate them. Online courses were useful and I used YouTube to help me! I take around £34,000 a year from the business. I plan to start paying myself more next year. Running your own business can be hard work, but I love it. I once worked from 8am in the morning until 8am the following day for an event.

I live with my aunt and uncle at present, but am soon moving to a one-bedroom flat in Battersea. The rent will be £1,129 per month. Normally, the rent would be closer to £2,500 a month. However, I’ll get a discount via an Intermediate Rent scheme, which supports those who would struggle to afford private rents, as I’ll be working in the local area.

Home ownership is not a goal of mine at the moment. I’m not ready to put roots down. If I did buy a property, I’d like one in London or Cornwall, which I could rent out via a platform like Airbnb. I think a one-bedroom flat in Cornwall would cost around £300,000.

Saving enough money for later life is a priority for me. I have about £10,000 saved up in old work pensions. I’ve been trying to track them all down but it’s been tricky and I’ve not had much luck. I’m looking to open a private pension too. I’d start adding £100 a month to it and increase this in time to £500 per month. I’d like to be financially comfortable in my late forties and fifties and be able to work on my own terms by that point.

I have a savings account with Plum which has £2,000 in it. I’ve also got a cash Isa with Virgin Money, but this only has £50 in.

I am motivated by money in terms of what it can do for me and how I can help others with it. It comes down to freedom. I want to travel to every continent in the world and not have to worry about money. I am keen to grow my business and plan to start paying myself £45,000 from next April. My current pay doesn’t get you very far in London. My pension is also a priority.

I would also like to establish a foundation to help marginalised women who feel they cannot break out of poverty. I want my life to count for something.

Grief is extremely challenging and my finances were not a priority for a long time. I want to let other people know that there is hope and things can get better in time.

Want to take part in How I Manage My Money? Email money@inews.co.uk

If you have problem with debt, you can contact Step Change for free das@stepchange.org or 0800 652 7491. If you feel in distress or have suicidal thoughts, Samaritans is a free helpline you can contact on 116 123.

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