Neko and her husband Jerry live in Toronto, Ontario with their dog and two cats. Everything about Neko’s life sounds perfect on the surface–a loving marriage, engaging work, fun hobbies, a close-knit family living nearby–but she’s harboring secret debt that’s causing her immense physical and emotional pain. Neko would like our help understanding how to overcome her shopping addition, which has led her to live paycheck-to-paycheck and carry a debt load on her credit card. Let’s work together to offer Neko a plan and a sense of hope for her future.
What’s a Reader Case Study?
Case Studies address financial and life dilemmas that readers of Frugalwoods send in requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comments section.
For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.
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Please note that space is limited for all of the above and most especially for on-the-blog Case Studies. I do my best to accommodate everyone who applies, but there are a limited number of slots available each month.
The Goal Of Reader Case Studies
Reader Case Studies highlight a diverse range of financial situations, ages, ethnicities, locations, goals, careers, incomes, family compositions and more!
The Case Study series began in 2016 and, to date, there’ve been 96 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.
I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight, queer, bisexual and polyamorous people. I’ve featured women, non-binary folks and men. I’ve featured transgender and cisgender people. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland, the Netherlands, Germany and France. I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.
Reader Case Study Guidelines
I probably don’t need to say the following because you all are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.
There’s no room for rudeness here. The goal is to create a supportive environment where we all acknowledge we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.
And a disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises.
I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.
With that I’ll let Neko, today’s Case Study subject, take it from here!
Hi Frugalwoods! My name is Neko and I’m 41 years old. My husband, Jerry, is 46. We live in the Canadian city of Toronto, Ontario in a house that’s co-owned by my uncle and dad. We have three beloved pets, Jasper our chihuahua who is 4 years old, Seth our tabby cat who is 12 years old and Willow our good luck black cat who is 18 years old. We chose a few years ago to live a childfree lifestyle and have not once looked back on that decision. We’ve been happily married for 15 years and look forward to many more years of happiness together!
Neko & Jerry’s Careers
I work full time in the head office of an industrial bakery doing invoicing, data entry, order processing and whatever other odd jobs pop up. My husband works in a home supplies warehouse doing pretty much everything from backroom stocking to front line customer service. He recently completed a forklift operation license course for free within his work, which has increased both his duties and pay. We both enjoy our work and–since we live close to both our workplaces–we enjoy the flexibility of a short commute. Another advantage is that I save money on bus fares by walking home a few nights a week. My workplace is also close to my in-laws’ home and Jasper, the chihuahua, spends the day with them while my husband and I are at work.
About 10 years ago, I was working in the spa industry as a massage therapist and waxing technician. I worked in that industry until my early 30s when I decided I wanted to change my focus to something more recession-proof. With financial help from my parents, I took some online continuing education college courses to upgrade my computer skills and become certified in the basics of business invoicing, accounts receivables and general logistics. I then found a job with a shipping firm, which led me to my current position at the industrial bakery. I have worked in this field since 2015.
Neko & Jerry’s House
Two years ago my uncle (my dad’s youngest brother) decided he wanted to move into a house as he was done with the condo lifestyle.
He and my dad approached Jerry and I with a deal:
- My dad would loan my uncle $60,000 to contribute to the down payment my uncle had ready for a house in Toronto.
- The house had been renovated to separate the main floor and the bottom floor into two independent living areas.
- Jerry and I would move into the bottom half of the house as my dad’s tenants.
- Once we have paid back the $60,000 contribution through a rental deposit of $1,500 a month, the mortgage will be re-drafted to list Jerry and I as partial owners.
- Currently, my dad and uncle own the house 50-50 and my uncle lives on the main floor.
It was definitely an adjustment to move into a house from an apartment and we are enjoying the learning curve that comes with this new experience. Having our own laundry room is the best part of our new living arrangements as I was sick of scrambling for quarters for our shared laundry facilities in our last apartment. And we have a backyard! All three of us pitch in to take care of the outdoor maintenance and Jerry and I have the freedom to redecorate/renovate our living area as we please. We set up an agreement with my dad to send him the rent payment as a bank transfer to an account he opened solely for rent payment collection.
Neko & Jerry’s Hobbies
I love to exercise and have a lot of workout equipment at home, plus I use a city-maintained outdoor gym a short walking distance from home. I also love comedy and have found an amazing improv studio where I take classes. These classes are a welcome escape for me as it allows for some unstructured fun and laughter, which also teaches communication skills. I know that my confidence and overall interpersonal skills have improved since I started studying improv. I have also made some incredible friends through improv class. My third vice is baking! Pretty much every Saturday morning I’m in the kitchen covered in flour while I mix together something yummy.
Since moving into our new house Jerry has found a new talent with gardening. He grows yummy tomatoes and peppers in our backyard and tends to some beautiful flower arrangements in the front yard. He is also handy and built a gorgeous stone pathway leading to the backyard. Together we enjoy playing basketball on the public court nearby our house and taking Jasper on long scenic walks in our neighborhood.
Overall we live a simple lifestyle and are very grateful for the support we have from both sides of our families in addition to the support we give to each other.
What feels most pressing right now? What brings you to submit a Case Study?
Let me put it this way: anyone who has watched the TLC show ‘Intervention’ knows that the show starts with a montage of the amazing things the person suffering from the addiction has done and how much he or she is loved, but then the addicted person stares blankly into the camera and admits to the truth of his or her addiction, which is ruining not only his or her life but also the lives of anyone associated with the addicted individual.
Well, I’ve done my montage of all the great things I have in my life, so that means it’s time for my big reveal:
I am addicted to online shopping and have over $9,000 in credit card debt
I’ve had this addiction for about 5 years now. It started with compulsive impulse buys whenever I was out shopping for essentials and then it moved to the online world. My biggest expense is shopping for clothes and shoes. There aren’t any triggers for my compulsive shopping, I just want to shop all the time. All I think about some days are the things I want to buy and how long it will take before I have the money or credit to buy them.
I have deliberately withheld the details of my debt from my friends and family, which only adds to my sense of shame about it.
The only motivation behind this behavior that I can identify is that I’m addicted to the feeling of anything new. There is something so satisfying about knowing that I have something brand new and that more new stuff is just around the corner. This feeling is accentuated by knowing that I can get the next new thing through the simple push of a few buttons.
My motivation for submitting a Case Study is to, for once, be honest about the mess I’ve gotten myself into and figure out if it will be better to focus all my resources into paying off my debt, or build some savings while simultaneously paying off my debt.
What’s the best part of your current lifestyle/routine?
One of the best parts of my current lifestyle is that I enjoy the work I do and get along well with my manager and coworkers. My workplace is a small business, which means that the voices of all employees are listened to and I have had my commitment rewarded with two raises over the past 3 years. I also enjoy having evenings and weekends off. I longed for a 9-5 lifestyle when I was working in the spa field, so now that I have it I am very grateful. Another good thing is that I have the advantage of living close to my family and in-laws, which means my husband and I have a lot of help or can lend help whenever a family member needs it. Having a close knit family is something that is very fulfilling to me. I also love that I’m able to incorporate exercise into my daily life by having the space at home for a mini gym, walking with Jasper or using the free outdoor gym facilities near my home.
What’s the worst part of your current lifestyle/routine?
The worst part of my current lifestyle is that, because of my debt and shopping addiction, I am always broke. I barely have enough money to last much more than 5 days after payday, which then means I turn to my credit card for spending. My debt far outweighs any potential net worth I could have and I also have no savings since I’m always dipping into what I intended to be my savings account to cover everyday expenses.
Being broke because of my addiction has made me become the very definition of living paycheck to paycheck and as such, I have no choice but to obsessively budget every dollar coming in and out of my bank account.
The cherry on top is that, thanks to many shopping websites accepting Paypal payments, I often have spent a good chunk of my paycheck a few days before I have receive it. This is because a Paypal payment will be approved right away and then take up to 3 days before it is withdrawn from my account. So if I order a new outfit on Tuesday and my payday is on Thursday, that fee will be deducted within a day of my pay hitting my bank account.
For the past few years, my mental state has been nothing short of a mess because of my spending habits. I’ve crunched the numbers of my debt and expenses time and time again until they’re nothing but abstract shapes on a computer screen.
There are the negative financial effects of debt for sure, but they are nothing compared to the emotional effects of debt by a long shot.
I remember a time when a friend was going through a divorce and he said he’s rather remember what it was like to be happily married than to remember why the relationship ended because remembering the good times was the only thing that gave him hope. This is how I feel about my debt. I prefer to remember the days of 15 years ago when I had money in the bank, was able to put down physical cash in a restaurant to cover my part of the bill, go shopping at the mall as a once-in-awhile treat (and therefore be grateful for my purchases) and was able to loan money to a friend in need because I had more than enough to go around. However, I can only avoid my truth for so long before it comes creeping back up on me.
I am constantly feeling a massive sense of shame and guilt. I feel like this isn’t the way a 40-something woman should be living. I should be able to control my impulses and understand the importance of saving for a rainy day. I should have smartened up long ago, should have found a healthier outlet for my shopping cravings, should have learned from all my past mistakes, I just should, should, should, should. I should be doing anything except what I am doing because everything I’m doing now is the wrong thing.
Neko’s Physical Health
My physical health has also suffered from my debt. During the summer of 2020 I became injured from a bad wipe out while on a run with my dog. I tripped over a rock while running at a high speed and ended up with injuries to my knee and low back, plus a bunch of deep scrapes and bruises. My mom took me to a walk-in clinic where the doctor diagnosed me with depression once I described my compulsive exercise regimes coupled with my overwhelming sense of despair. I was prescribed an antidepressant medication that I’m still taking today which is an out of pocket expense I have no choice but to budget for.
The medication has definitely calmed my mental state somewhat which helps me to get by in my day to day life. My knee and back injury have healed up with some efforts of my own though I know I could definitely benefit from seeing a chiropractor or physiotherapist to treat the ongoing pain and stiffness issues I’m having. However, the fact is those are out of pocket expenses that I can’t possibly afford as long as I have my debt hanging over my head. People have told me to look into an insurance package which would help cover healthcare expenses, though paying for insurance coverage is impossible too as that’s another monthly fee I can’t cover.
I also haven’t been to a dentist for a checkup of any kind since my early thirties and I’m about 5 years overdue on seeing an optometrist to get my prescription lenses checked and updated for the same reason I can’t see a chiro or physio- I can’t afford to because of my debt. The only reason I was able to even speak to a doctor is because standard walk-in or family doctor checkup appointments are covered by the government in Canada and therefore are not billed to the patient.
My situation is compounded by the fact that I have reached the top of my earning bracket for the type of work that I do. Any job move I could make would be a lateral move and would also most likely mean giving up the convenience of a work location I can walk to. I have dreams of pursuing higher education and completely changing my line of work, but that’s just another thing I can’t do because of my debt.
That being said, I know my income is more than enough to cover my necessary expenses and I also know I could be making wiser saving and investing decisions if I didn’t have my debt and addiction to deal with. I’ve looked into finding a second stream of income, however any attempt I have made of monetizing content I have posted online has turned up absolutely nothing and I’ve realized that I’m just not willing to give up my evenings or weekends for a second job like working in retail. My time outside of my full time work is spent with my husband and pets or in improv class and having that time means too much to me to give it up even temporarily.
As I’m sure many of you have figured, I can’t see a therapist to get help for my addiction because that would be another out of pocket expense I can’t afford. I’ve looked into some free online therapy groups and so far haven’t had much luck though I’m still holding out some hope I can find something soon. I managed to find a free phone-in therapy line which I have used a few times and have found somewhat helpful.
The final point I must make here is that declaring bankruptcy or a consumer proposal isn’t an option for me. I already declared bankruptcy in 2009. This was mainly to deal with debts I incurred while I was in college full time and depending on two credit cards to get by. I was discharged and had my credit report cleared 5 years later. Declaring bankruptcy again would completely trash my credit rating (not that my credit rating is great now, though if I manage to pay down my debt there will be the eventual result of it improving) and getting any kind of credit again would be next to impossible. This matters to me as I understand that having bad credit can affect me in many negative ways further down the road and my ultimate goal here is to get out of debt on my own. I know that this is a realistic goal as my debt is only from one credit card which could be paid off with some discipline, however it’s finding that discipline that is the difficult part.
Neko’s Future Career Ideas
I once heard the advice that if you feel stuck in your current situation, remember the things that interested or inspired you as a kid or teenager. Odds are these are the things that will still spark your interest today and could provide a starting point for a new direction in your life. One thing that really sparked my interest as a teenager was the field of psychology. I took a few psych courses in high school and was fascinated with the different theories of behavior both individually and within a group.
I found an old university psychology textbook of my mom’s and poured through it over a school break in my last year of high school and began to entertain the thought of being a psychiatrist. But then of course I succumbed to peer pressure and decided I needed to build a life that looked ‘cool’ to everyone else. So I pursued fine arts in college which I now know was my first in a long line of huge mistakes through my late teens through early twenties.
Lately I’ve been thinking more about my old psychiatrist dream. The first step to achieving this would be obtaining a degree in psychology. I could do this remotely while continuing to work my current job. I’ve also been thinking about going back to school in general. I could potentially upgrade my accounting skills and get the title of Accountant. This could lead to a higher paying job and I could still pursue remote school part-time.
Another route that appeals to me is taking courses–or a ‘boot camp’ training–in coding. I know people through my improv classes who took this route and it led them into the positions of website development and web traffic analysis. These types of jobs pay higher than my current position and can be done remotely. While I don’t love the idea of a remote job, I see the advantage of saving a ton of money on travel costs and I know I could benefit from anything that will save money in the long run. What appeals most to me about these types of jobs is the analysis aspect, which is also what interests me most about Psychology. I love the concept of being able to identify Pattern A, link it to Behavior B, predict it to lead to Outcome C and then analyze Final Outcome D.
Another potential avenue could be becoming an elementary school teacher. In my province there are a lot of teaching positions opening over the next few years as the generation of teachers who have held the longest running positions are retiring. There’s a big push now for younger people to pursue a degree in teaching. However, I would have to obtain a degree of some kind before I would be eligible for Teacher’s College and that would be a minimum of three years of study depending on the subject. However, I can see the long-term advantages of a position like this as it would mean steady pay and an employer retirement match.
Clearly the psychology degree option would be the most costly and take the longest. It would run for 12 terms and cost about $2,000 per term. The coding classes would run about $300 per class and run for 6 sections, so that could be completed within a year. Any of these options are a possibility and I am continuing my research into all of them.
However, before I make any type of choice about the future I know I have to get a handle on my spending and clear my debt.
Where Neko Wants to be in Ten Years:
- To be debt free and have a savings account with at least 6 months worth of expenses.
- My vision of the future isn’t really that grand. I simply want some financial security and to have the cloud of debt lifted. I dream of a time in which I could take a spontaneous weekend trip with my husband or treat my family to a nice dinner out for a special occasion because I have the money in the bank to do so. I guess it just comes down to one word – Freedom. I want the freedom of being debt free and therefore able to take advantage of the opportunities that a debt free lifestyle provides.
- Career: This is one area I’m still not sure about.
|Item||Gross Income||Deductions & Amount||Net Income|
|Neko’s net income||$2,880||taxes $270-$300||$2,325|
|I don’t have any kind of insurance or benefits through my workplace as I have chosen to opt out of the plans to lessen my deductions|
|Item||Outstanding loan balance||Interest Rate||Loan Period/Payoff Terms/Your monthly required payment|
|Capital One credit card||$9,294||2.15%||$400-$550 per month|
|Item||Amount||Notes||Interest/type of securities held/Stock ticker||Name of bank/brokerage||Expense Ratio|
|Tax Free Savings Account||$24||Tax free savings||Tangerine||N/A|
|Neko’s share of the Rent||$624||This is transferred to my husband in chunks of $312 on every payday during the month|
|General shopping||$500||As I have described above this is mainly spent on clothes / lingerie / shoes which is a combination of spending from my checking account and my credit card.
This ranges from $300 – $700 per month.
|Groceries||$350||Includes household cleaning supplies and dry kibble for all my pets|
|Personal care||$150||Includes haircare, skincare / makeup products and non prescription sleeping pills|
|Drop in improv classes||$150||This includes grabbing a small meal before class and each class is $25|
|Public transit||$125||I cut down on bus fares by walking home from work once or twice a week|
|Pet store||$100||Includes higher quality cat litter and wet cat food for the senior cats, also includes treats / chews for Jasper|
|Smartphone||$92||This is for my iPhone|
|Jerry’s smartphone and Mom in law’s phone||$72||This plan includes a cheap add on for Jerry’s mom to have her own phone, the price for cable and internet is added into the rent payment that Jerry and I transfer to my dad|
|Mental Heath pills||$15.58||I purchase both of these prescriptions in 90 day supply packs, I divided each price by 3 for the monthly cost|
|Birth control pills||$15.35|
Neko’s Questions for You:
- Should I make whatever sacrifices necessary to pay off my debt in the shortest time frame possible? Or should I or focus on saving up an emergency fund while making smaller debt re-payments?
- Does anyone have advice on how to break a destructive addiction?
Liz Frugalwoods’ Recommendations
Neko, you’ve done a very brave and wonderful thing today. It is challenging to share our finances even when we’re in the best of circumstances and you’ve done the remarkable work of being honest and vulnerable about the struggles you’re having. You should feel proud that you’ve come face to face with your debt and are asking for help. I want to commend you for doing this and for your desire to change your relationship to spending. I am cheering you on! Let’s get to it.
The Root of the Issue: An Addiction to Compulsive Spending
While Neko’s questions are technically about a financial problem, the deeper issue here is addiction, which Neko already knows. I will certainly offer advice on how to pay off her debt; but as Neko articulated, without tools and a support system behind her, she’s likely to slide back into the cycle of debt–>payoff–>debt.
→Neko needs to tackle the root of her addiction and she needs to do this with a trained therapist.
I know that therapists cost money and I know this is why Neko hasn’t been to a therapist, but, I think it’s imperative she find one. And fast. This is one of those rare instances where I recommend that someone spend more money in order to get out of debt. Neko demonstrates a great deal of self-awareness in her writing and she is fully cognizant of the financial and mathematical problems at hand. In light of that, she needs a therapist to work with her to untangle the emotional threads binding her to this addiction. There is help out there and there is hope; Neko you can do this.
Suggestion #1: Hire a Therapist Today
I encourage Neko to find a therapist who specializing in shopping addictions/compulsive spending and has experience helping people with this specific challenge. I consider this a non-negotiable investment in Neko’s future. While yes, it might temporarily push her further into debt, it is a vital tool for Neko’s longterm success. Finding a good therapist is made all the more crucial by the fact that Neko’s physical and mental health are suffering alongside her financial health. Neko, you do not have to live this way–you can overcome this addiction, but you will need help to do so.
Suggestion #2: Start Attending Debtors Anonymous Meetings This Week
I strongly encourage Neko to start regularly attending Debtors Anonymous meetings. Here is a list of meetings in Toronto that are happening later this week.
Debtors Anonymous offers hope for people whose use of unsecured debt causes problems and suffering. We come to learn that compulsive debting is a spiritual problem with a spiritual solution, and we find relief by working the D.A. recovery program based on the Twelve-Step principles.
The only requirement for membership is a desire to stop incurring unsecured debt. Even if members are not in debt, they are welcome in D.A. Our Fellowship is supported solely through contributions made by members; there are no dues or fees.
Debtors Anonymous is not affiliated with any financial, legal, political, or religious entities, and we avoid controversy by not discussing outside issues. By sharing our experience, strength, and hope, and by carrying the message to those who still suffer, we find joy, clarity, and serenity as we recover together.
Debtors Anonymous offers hope for people whose use of unsecured debt causes problems and suffering in their lives and the lives of others.
Please go to a meeting this week, Neko. I had a Case Study participant in 2020 who was in the Debtors Anonymous 12 Step program and she shared her story here: Reader Case Study: Debtors Anonymous Helped This Wildlife Biologist Recover From Compulsive Spending.
Additionally, your local Debtors Anonymous group may be able to offer recommendations on therapists familiar with treating compulsive spending.
Suggestion #3: Focus on Healing Right Now
While Neko’s income is low and she outlined a number of ideas for increasing it, my sense is that an increased income would just equal increased debt.
Until Neko has effective tools for handling her addiction, I don’t think that more money is the sole solution.
I encourage Neko to focus on healing right now. I encourage her to put her energy into working with a therapist and attending Debtors Anonymous meetings. That’s going to feel like a second job and she should allow herself the grace to not worry about finding another career path right now. Right now, her job is to heal.
Suggestion #4: Cancel The Credit Card
Neko needs to cancel her credit card. She will still be responsible for paying off the entire balance (and it will still accrue interest), but she will no longer be able to use it to go further into debt.
Some credit card companies won’t let you cancel a credit card that carries a balance. If that’s the case with Neko’s card, I suggest she instead freeze the card.
→Another option is to look into a balance transfer credit card.
In this case, you transfer your credit card debt to a 0% interest card in order to pay it off without accruing more interest. If Neko does this, however, she has to commit to not spending on this new card and to closing this card as soon as the balance is paid off. Note that with most of these cards, the 0% interest is an introductory rate and the interest often skyrockets after the introductory period ends.
The goal here is to stop Neko from going further into debt. That’s the first step before we get to debt payoff.
Suggestion #5: Pay Down The Debt
Once Neko is no longer accruing debt, she should use the average of $500 per month she was spending on shopping to pay off her credit card. I made a chart below demonstrating how this pay-off could play out.
Suggestion #6: Save Up an Emergency Fund
In my opinion–and if I’m understanding Neko’s family/living situation correctly–it is less imperative for her to save up an emergency fund prior to debt payoff because:
- Her father and uncle own her home;
- She is splitting house expenses with her husband and uncle.
Thus, if she were to suddenly lose her job, I can’t imagine her family would allow her to become homeless or not have food to eat. To be clear, Neko does need her own emergency fund; however, in my observation, her need for an emergency fund isn’t as imperative as discharging her debt.
Suggestion #7: Review Expenses
Let’s take a look at Neko’s expenses to determine how she might go about paying off debt and then saving up an emergency fund. As I noted above, Neko’s income is low, but her costs (aside from the shopping) are also low!
Anytime a person wants or needs to spend less, I encourage them to define all of their expenses as Fixed, Reduceable or Discretionary:
- Fixed expenses are things you cannot change. Examples: your mortgage and debt payments.
- Reduceable expenses are necessary for human survival, but you control how much you spend on them. Examples: groceries and gas for the cars.
- Discretionary expenses are things that can be eliminated entirely. Examples: travel, haircuts, eating out.
I’ve categorized Neko’s expenses below and made suggestions on where she might be able to reduce her spending. The caveat, of course, is that only Neko knows which line items are priorities and which can be reduced. I do my best, but it’s up to Neko to decide what (and how much) is feasible for her to spend less on:
|Item||Amount||Notes||Category||Proposed New Amount||Liz’s Notes|
|Neko’s share of the Rent||$624||This is transferred to my husband in chunks of $312 on every payday during the month||Fixed||$624|
|General shopping||$500||As I have described above this is mainly spent on clothes / lingerie / shoes which is a combination of spending from my checking account and my credit card.
This ranges from $300 – $700 per month.
|Fixed (as debt pay-off)||$500||This is now going towards debt pay-off, not shopping.|
|Groceries||$350||Includes household cleaning supplies and dry kibble for all my pets||Reduceable||$300||Is this split with Neko’s husband? Is the pet food cost shared?|
|Personal care||$150||Includes haircare, skincare / makeup products and non prescription sleeping pills||Discretionary||$50||What opportunities might there be for reductions here?|
|Drop in improv classes||$150||This includes grabbing a small meal before class and each class is $25||Discretionary||$150||While this is discretionary and could be eliminated, it was clear from her write-up that improv is a crucial part of Neko’s sense of wellbeing and general mental health. I’m not inclined to suggest she eliminate something so important while she’s going through the challenging work of recovery.|
|Public transit||$125||I cut down on bus fares by walking home from work once or twice a week||Reduceable||$100||Does Neko’s employer offer any transportation benefits? Are there any discounts she could take advantage of? Would walking more often be an option?|
|Pet store||$100||Includes higher quality cat litter and wet cat food for the senior cats, also includes treats / chews for Jasper||Reduceable||$75||Any opportunities to reduce this? Is this cost split with Neko’s husband?|
|Smartphone||$92||This is for my iPhone||Reduceable||$15||Time to get an MVNO! Yes, Canada has them too! I suggest Neko get on this ASAP as this is low-hanging fruit!|
|Jerry’s smartphone and Mom in law’s phone||$72||This plan includes a cheap add on for Jerry’s mom to have her own phone, the price for cable and internet is added into the rent payment that Jerry and I transfer to my dad||Fixed?||$72||I’m confused about this expenses, but am assuming this is somehow part of their rent and utilities cost share since I don’t see any utilities listed? Electricity, etc? Correct me if I’m wrong, Neko!|
|Mental Heath pills||$15.58||I purchase both of these prescriptions in 90 day supply packs, I divided each price by 3 for the monthly cost||Fixed||$15.58||Very important fixed cost|
|Birth control pills||$15.35||Fixed||$15.35||Very important fixed cost|
|Monthly subtotal:||$2,194||Monthly subtotal:||$1,917|
|Annual Total:||$26,328||Annual Total:||$23,004|
If Neko is able to make the above suggested reductions, she’ll be on track to save an extra $277 per month, which she could put either into an emergency fund or towards debt repayment.
Suggestion #8: Create and Follow a Debt Payoff Timeline
Concurrent with seeing a therapist, going to Debtors Anonymous meetings and cancelling her credit card, I suggest Neko enact one of the two below Monthly Debt Repayment Options.
→Option #1 entails Neko putting the $500 she previously spent on shopping towards paying down the credit card.
→Option #2 entails Neko putting the $500 on shopping PLUS the proposed additional savings of $277 per month towards paying down the card.
I’ve included the interest rate accrual for both of these options.
|Month and Year||Monthly Debt Repayment Option 1:
The $500 previously spent on the card
|Monthly Debt Repayment Option 2:
The $500 previously spent on the card + the $277 in additional savings per month
|Option 1 Credit Card Monthly Interest Accrual (Rate of 2.15%)||Option 1 Debt Balance||Option 2 Credit Card Monthly Interest Accrual (Rate of 2.15%)||Option 2 Debt Balance|
|June 2024||$500||$777||$104.20||$4,450.56||$15.96||PAID OFF!|
|April 2025||$500||$777||$10.38||PAID OFF!|
As we can see, with Option 1 ($500 per month), Neko’s debt will be fully paid off in just over two years in April 2025. With Option 2 ($777 per month), her debt will be obliterated in just over one year, in June 2024.
→Neko, that is really soon!!!!
I hope that seeing how quickly she can be debt-free gives Neko hope and shows her how well within reach this goal really is! This is not an insurmountable amount of debt. This is something Neko can do, and pretty quickly too!!!!!!
Suggestion #9: Invest for Retirement
Once Neko has:
- Paid off her debt (and committed to never going into debt again)
- And saved up a full emergency fund, which should be three to six months’ worth of her expenses…
She can turn her attention to investing for her retirement. I also encourage her to pay for the health and dental care she’s been deferring. The above debt payoff schedule is a quick one and it will take perseverance to follow. But once that debt is gone? Neko can focus on these other important priorities.
- Find a therapist who specializes in compulsive spending and book an appointment ASAP.
- Begin attending Debtors Anonymous meetings this week. Commit to going regularly.
- Cancel or freeze your credit card ASAP so that you cannot go any further into debt. Explore the possibility of a balance transfer to a 0% interest rate card.
- Review the above suggested expense reductions and determine where it will be possible for you to save more.
- If you are able to save more every month, follow the Option 2 debt repayment schedule, starting next month (May 2023).
- If you are not able to save more every month, follow the Option 1 debt repayment schedule, starting next month (May 2023).
- Once your debt is paid off, save up an emergency fund of three to six months’ worth of your spending.
- Once that’s done, put money towards your deferred health and dental care and begin researching your retirement investment options.
- Know that you are not alone on this journey. There are many other folks out there with these same struggles. That is why Debtors Anonymous exists and that is why you need to attend their meetings.
- Keep us posted on your journey–I know that we are all cheering for you. All of Frugalwoods wants the very best for you!
Ok Frugalwoods nation, what advice do you have for Neko? We’ll both reply to comments, so please feel free to ask questions!
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