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 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…