‘Eating disorder treatment created a cycle I’m still stuck in’: I’m living paycheck to paycheck with debts and health expenses. How can I break free and secure my financial future?

Hi Money Minder,

Hey there, I’ve realized that I need to make some changes because what I was doing before just wasn’t cutting it.

So, here are my goals: Get rid of debt, get a bachelor’s degree with minimal student loans (less than $18,000), build up an emergency savings fund (aiming for $6000), and start putting something away for retirement.

A little background about me – I’m 24 years old. From late 2020 to early 2021 (around 6 months), I was in an in-patient recovery center dealing with an eating disorder. It was rough, but I managed to relearn how to eat properly. I’m almost done with my associate’s degree from the local community college – just one class left to go (which cost $700 and has already been taken care of). I’m thinking about pursuing a bachelor’s degree in the future, but I haven’t decided on a specific school yet.

As for my financial situation, I bought a new 2020 Kia for $26,158 at 3.99% interest over 73 months. I still owe $10,826 on it, and that’s my only debt.

I have two credit cards with zero balances. I use them for everything, but I make sure to pay them off in full each month. The interest rate is 18%, and the credit limit is $17,600. My credit score is pretty solid, sitting just below 790.

Because of my eating disorder and related treatments, I’ve had quite a few health issues. Over the past three years, I’ve shelled out over $23,000 for treatment, even with insurance. Dental work set me back about $11,200, and I’ve had thyroid and hormonal problems that cost me $4,500. Luckily, I managed to pay off all these bills, and none of them are in collections.

On the income side, I have a full-time job making $60k a year. Right now, I only have $400 in savings – it was higher, but I had a dental emergency that wiped it out.

My monthly take-home pay is around $3400. Some of my major expenses include: $410 for the car payment, $220 for car insurance, $70 on gas, $1300 for rent (includes water, sewer, garbage, electricity, and internet), $79 for pet insurance, $109 for the gym (but that’s ending soon), $0.99 for cloud storage, $280 for groceries, and $150 for eating out.

I feel like I’m stuck in a never-ending cycle of spending and saving. I want to break free from living paycheck to paycheck. I’m willing to make sacrifices to turn things around, but I don’t know where to start. I want that degree, an emergency fund, and to start making progress on investments and retirement, but it all seems out of reach right now.

I’ve been making monthly payments on my car, thinking about investing, but should I focus on paying off the car first even though the interest rate is under 4%?

I do use a budgeting template and feel pretty good about my financial know-how, but those monthly health expenses keep throwing me off. Any tips on how I can get ahead? Another big reason I want to get my finances in order is because I’ve started a new relationship, and I don’t want to drag my bad financial habits into it. I want to build a solid financial future for both of us.

Thanks,
Trying to Get Ahead

Response from THE MONEY MINDER:

Hello There,

I’m sorry to hear about the challenges you’ve faced and the financial struggles you’re currently navigating. It’s clear that you have set some ambitious yet achievable goals for yourself, and I commend you for taking the steps to improve your financial situation.

Given your current circumstances, it seems like prioritizing debt repayment should be your first focus. While the interest rate on your car loan is under 4%, eliminating this debt will free up more of your monthly income for building your emergency savings and investing for the future. It’s important to break the cycle of living paycheck to paycheck, and reducing your debt burden is a crucial step towards financial stability.

Additionally, considering your health expenses, it might be helpful to create a separate sinking fund specifically for medical costs. By setting aside a portion of your monthly income for unexpected healthcare expenses, you can better prepare for these costs without impacting your budget.

Since you’re already using a budgeting template, continue to track your spending closely and look for areas where you can cut back. For instance, reducing dining out expenses or finding ways to lower grocery costs can free up more money for your financial goals. Also, be proactive in addressing any upcoming health expenses by researching options for managing these costs effectively.

Finally, with your full-time job and a decent salary, you have the potential to make significant progress towards your goals. Stay committed to your financial plan, prioritize debt repayment, and gradually build up your emergency savings. It’s essential to communicate openly with your new partner about your financial journey and work together towards a more secure future.

All the best from THE MONEY MINDER.