I would second LET. They usually have a lot of good offers around Black Friday, you can get a pretty decent VPS for like $10-20 / year.
You can keep an eye out for that, and see if this is really what you want to get into: https://lowendtalk.com/categories/offers
It is like a marketplace, so make sure to check reviews of the host provider before buying - which you can find on the same site.
After trying a bunch, I'm using Obsidian + now. Good thing with Obsidian is your notes are ultimately a bunch of plaintext files, so you can do whatever you want with them, and it comes with clients for most platforms.
Another option is Trilium, it is pretty powerful, and has a webapp so as long as you can access a browser, you'll be able to access your notes. https://github.com/zadam/trilium
I just setup my own instance a few days ago, if it interests you, do give it a shot!
IIRC reading about it, all data for posts is set to be deleted automatically on a schedule. The catch is that schedule is every 6 months, and it is not configurable currently. From what I read, textual posts of lemmy doesn't consume that much, many reported anywhere from 1-10 GB of data over 6 months - ofcourse it all depends on what kinds of communities are subscribed to your instance.
Not sure if you can restrict image sizes or numbers - atleast not through the admin UI, maybe it's possible through config. You can set global rate limit on image uploads though to not go too crazy.
You can set it so only admins can create communities, or admin would have to approve new communities, or free for all.
If you already have a server, try it out. It shouldn't be tricky, particularly if you're familiar with docker.