Mint Money Audit: Consumed by Debt, Can’t Begin to Save. Help!

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This week’s financial audit is for Elizabeth, a 28-year-old case manager who works on behalf of families and caregivers in Oakland, CA.

When I asked Elizabeth about her top goal she said it is to prioritize her finances. She feels overwhelmed and stressed by her $27,000 in student loans and feels she has no room in her budget to save.

She has no retirement fund and merely $1,000 in an emergency fund, which needs replenishing from time to time. Even after paring down her expenses – including moving in with a roommate to save $400 a month on rent — Elizabeth says she can’t find any ways to set aside cash for a rainy day.

“Being a single woman with one source of income, I have a lot of anxiety about not having a large emergency fund,” she says. “Should I stay the course and continue to aggressively pay off my student loans or begin funding other priorities and slow down my debt repayment?”

Here’s a snapshot of Elizabeth’s current financial profile:

Monthly take-home pay after taxes and health insurance costs: $3,500

Average monthly expenses: $3,315

  • Minimum on Student Loans: $260
  • Rent: $975
  • Car Payment: $480
  • Insurance, Gas, Parking, Tolls: $300
  • Food: Up to $900 (includes trips to Whole Foods)
  • Health & Fitness (acupuncture, gym membership, chiropractor): Up to $400

She recently charged $1,500 to her credit card after her car broke down, since her emergency savings wasn’t sufficient. She says she would like to use the loan calculator to see how much she needs to pay to pay this debt off in two months time.

Also, worth mentioning: She expects to receive a $12,000 bonus from work in February. This will be taxed, but the remaining lump sum will prove very helpful!

Farnoosh’s recommendations:

This may sound counterintuitive, but I think Elizabeth needs to relax a little bit over her debt. I’m sensing that her laser sharp focus on her student loans is compromising her ability to actually become debt-free anytime soon because she’s neglecting to save. Without sufficient money in the bank to afford life’s unexpected expenses, Elizabeth continues to tap credit to make ends meet. At this rate, she’ll be in a cycle of debt for many years to come.

Here are my top recommendations to help her adequately address debt and create $6,600 in emergency savings over the next 12 months.

Stick with Minimums…for the Moment: While Elizabeth’s debt is what’s haunting her the most right now, it’s hardly her biggest expense each month. The minimum balance, $260, equates to less than 10% of her take-home pay. Stay the course is my advice. There are bigger fish to fry (and I’ll get to them in a moment.)

As for her $1,500 credit card balance, the interest rate is 17% and the minimum monthly payment is $36.

For the next year, I recommend just paying a flat $100 each billing cycle. With nothing in savings, this is not the right time to hustle and pay off the entire balance in two months.

Elizabeth’s credit score is a 730, so she could try to ask for a lower interest rate from the bank. She may even qualify to transfer her debt to a 0% introductory interest rate credit card which would allow he to eliminate interest payments for the next year and squash that balance even faster.

Carve Out $10 a Day…Right Away: Elizabeth only has $1,000 in savings (on a good day), which is proving insufficient. Last month her car broke down and that wiped out her savings and then some. She had to dip into her credit card to pay for the new transmission.

With so much focus on her debt, she’s put savings on the backburner. When rain falls, she’s left with no umbrella…throwing her deeper into debt.

To end the cycle, I propose a savings challenge. Can Elizabeth automatically set aside $10 a day or $300 per month? Automatically take $150 from each biweekly paycheck into an online checking account.  By the end of the year, this move alone would save her $3,600.

Pay yourself first before making certain discretionary expenses.

Cap Food Spending: As for her discretionary expenses, Elizabeth’s food budget could use some downward revision. She admits she was spending over $1,000 per month on food but has since reduced that to anywhere from $600 to $900. I suggest setting a limit (and creating an alert on her Mint account) to cap food spending to never more than $600. That’s $20 per day, which may not always seem like enough but with proper meal planning, buying some items in bulk with her roommate (and limiting trips to pricey Whole Foods) it can afford her a fridge full of healthy food and even some fun nights out with friends.

Reduce Acupuncture Visits. Save $720: Self-care is important and Elizabeth really enjoys acupuncture, but the monthly visits cost $120 a pop. Could she, instead, go once every other month? This would make saving $300 monthly (a bigger need) much more feasible.

Establish a Roth IRA: Elizabeth’s company doesn’t offer a 401(k), but she has been considering opening a Roth IRA, something I fully support. With a $12,000 work bonus (minus taxes) coming her way in February, I recommend taking $5,500 of that and fully maxing out a Roth IRA for the year. I’d place the remainder – probably around $3,000 after taxes given her tax bracket — in a rainy day account.

Revisit the Budget

Here’s Elizabeth’s new monthly budget breakdown:

Pay Yourself First: $300

Rent: $975

Student Loans: $260

Car Payment: $480

Insurance, Gas, Parking, Tolls: $300

Food: $600

Health & Fitness: $340 (average, given six fewer acupuncture visits in 2017)

Credit Card: $100 (triple the minimum)

Total monthly expenditure: $3,355

Take-home pay: $3,500

Net: $145 (suggest keep in checking account)

Year 1 savings: $6,600 in emergency fund ($3,000 from bonus plus $3,600 from saving $10 per day) and $5,500 in a ROTH (also thanks to the bonus).

You got this, Elizabeth!


Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.