Kate, a Graduate Assistant Budget and Future Goal Breakdown

Reader Kate (very nicely) asked me to help her out with this budgeting thing and cash flow.

I cannot do every single budget that comes along, so I’ll tend to do big budget and my notes for each situation and hope that it helps others who are in similar situations.

See the Budgeting Tool I use here. It is more detailed per month but it doesn’t forecast into 5-10 years unless you make 5-10 copies.

Kate, a Graduate Assistant’s Profile in her words:

I’m a 23 year old graduate student with $20,000 in loans from college.

I’m a PhD student, and will be in my program for at least another 4 years, with tuition waived and a $15,000 per year income.  My loans (both Stafford) are accumulating interest (6.8%), but I don’t have to pay anything back while I’m in school.

I’m curious how you would suggest that I prioritize saving vs. paying back loans; and how much of a cushion is sufficient.

Do you think that the $1000 cushion you had while paying off your loans was sufficient*, or should I aim a bit higher.

I would also love feedback on how aggressively you think that I should try to pay off my loans now.  I will certainly be earning a lot more once I have my degree, but will also have more expenses (I don’t want to rent forever, hope to have kids in my mid 30s, etc).

*Note: I had $60,000 in debt with only $1000 in cash in the bank. This is because my job was very secure and I had no worries about being fired whatsoever.

So the year that just passed, this is what Kate provided me:

  • She has $1000 saved
  • She has a BF who is working but whose income is not included here

She ended the year with a $1240 in deficit, plus her student loans still outstanding.

Here are her projected budgets for the rest of the years and even her life:

  • Ignore the note next to Wardrobe. The major overhaul for her wardrobe only happened in 2010.

I assumed her job would pay $80,000 but net $60,000 a year. I don’t want to get into exact numbers with taxes, fees and whatever else, so Kate will have to adjust accordingly based on her personal income taxes.

  • Ignore the note next to Wardrobe. The major overhaul for her wardrobe only happened in 2010.

You will notice a couple of big line items under expenses such as moving, furniture and a car.

She mentioned she wanted to buy a used car in 2016, but I don’t know what her budget is or what she’ll spend, so I took $10,000.

Could be more, could be less.

I also divided it by 12 because I am assuming she will save the money first and then spend it to pay a car off in full, without a car loan, car lease or car note.

  • Ignore the note next to Wardrobe. The major overhaul for her wardrobe only happened in 2010.


  • $60,000 net per year once she gets her job assuming 25% taxes
  • Kate’s assumption: Rugrat #1 will come along in 11 years when she is 34
  • Kate’s assumption: Rugrat #2 will come along in 14 years when she is 37
  • She wants to save for college funds for her future kids, retirement & buy things
  • Used car bought in cash, about $10,000 (not sure what it would cost)
  • No second income set up here, so I’m assuming ONE income forever.
  • **Assuming no lifestyle inflation but this is really optimistic 🙂

**No lifestyle inflation is a tough sell for anyone, including me.

For me not to spend more than what I’m “used” to, I have to watch my budget and keep tabs on myself. Kate’s pretty good with her budget in general, based on the numbers she gave me, so I have the utmost confidence she won’t go crazy and spend double what her expenses are today. Still, this is something to consider.


In a nutshell:

  • Missing savings and/or emergency fund (what’s the difference?).
  • Beef up her EF before paying her loans aggressively
  • Accumulated interest from 4 years packs a punch once she graduates = OUCH
  • No retirement savings included either, and I’d save for retirement over a college fund.

Missing savings and/or emergency fund (what’s the difference?)

That’s the biggest glaring omission I see in her budget. No regular or emergency fund savings. I know it’s hard when practically everything you makes goes to expenses, but life isn’t quite as rosy as we’d like it to be. Things happen, people get hurt, sick or lose their jobs.

Emergency Fund should be 3 months to a year worth of living expenses saved.

It is a lot of money, but as I said, you cannot plan for everything to go perfectly, you can only plan for when things go wrong… and if everything does go perfectly, you’re well-prepared for the future.

No retirement savings included either; Save for retirement over a college fund

It’s great to want to pay for your kid’s educations, but you also have to save for your retirement.

In fact, I am a firm believer of funding your retirement over your kids’ college funds, because you do NOT want to be relying on your children to pay for your retirement when you are unable to make any money to support yourself.

Support yourself first, ask of nothing from your children and if you can help them and you want to, by all means go ahead.

I don’t know what Kate will want to live on for retirement, but let’s say it’s 70% of her future income, or $42,000 a year.

Assuming she starts saving in 2016, or 6 years from now when she is 29, and she wants to retire at 65  she will need to save a minimum of $6000 per year or $500 a month which is right on target with my assumptions above.

Calculation here, and MSN Retirement Planner Calculator used here with my variables:


  • Age = 29 because I’m assuming NO retirement savings until she has a FT job
  • She is to retire at 65
  • Women live longer, so I say the age of 90 for women, 85 for men.
  • Her annual income is her assumed net income after taxes (may vary)
  • 10% saved for retirement is a good number, and is $6000/year
  • Before retirement, her investments could earn 8% as an average
  • When she retires, her assets will be in low-risk, low-earning investments so it’s 5%
  • She needs 70% of her %60,000 net income, or $42,000
  • I added Social Security in there, but you can decide to be more conservative & remove it

Note: The actual numbers aren’t THAT important.

Before you scream at me,  they’re important, but there are SO many variables you can’t account for, that you need to just be as conservative as possible for what you think is realistic, so your numbers WILL change if you do the calculations for yourself.

She’ll want a house in the future but doesn’t know where, how much or what it’ll cost

Again, another variable you can’t control. This one I’m leaving out of any future budget calculation I make below, but keep in mind that her mortgage may not equal her $335 – $770 estimate of what she pays for in rent and utilities.

Then you have to factor in taxes for the home, that she’ll want to save a 3% maintenance fund for the house just in case something happens, realtor fees, moving fees, new furniture, decorations and so on.

Everything goes up in cost.

Instead of paying her student loans, save the amount as her EF for now

Her loans are interest free for now… but not really. All “interest-free” means, is that you don’t need to make any payments on your loan now, nor pay the interest now, but the interest actually accumulates for 4 years before it she graduates, then it gets added to her loan.

Even so, she should save for an emergency fund and then put as much as she can towards her debt (since it’s accumulating interest) so it stops compounding and increasing with a big fat loan at the end.


I didn’t change much, but here it is for next year, and so on.


  • $1000 in savings
  • Has a 403(b) retirement plan but hasn’t saved anything into it
  • No full-time job until she’s 29 in the year 2016
  • Debt will be in the form of 2 loans the bulk of it with 6.8% interest

The major change I made is to add a savings/emergency fund plan

For the “Emergency Fund”, I would save as much as I can into it up to 3 months and then channel the rest towards student debt.

By reducing her principal, she will reduce the cost of her debt overall (I kept it at $85/month just for simplicity’s sake), and she could be debt-free before she graduates.

The decision to save for retirement is subjective: I said “No”, but she might decide “Yes”

I am still not saving for retirement at this point because the numbers she gave me are pretty low for living and even though she could start early and make use of compounding interest, this is not my call to make seeing as she has debt and wants to make that her #1 priority.

Also, retirement savings means you put the money in and can’t take it out. I want her to have liquid savings until she’s financially able to sock away money without having to draw on it until she’s 65.

She can always decide to save $100 in her 403(b) retirement plan (no match) at work.

So here’s what I’m thinking:

This is a very, very optimistic plan, and before you pick it apart, I understand that things happen, emergency funds get eaten, and sometimes you need more than you think you did.

That said, this is what I think could realistically be done:

Moving on to the next years:

As you can see this is what she could be owing at the end of 2014, going into 2015.

Once she graduates in 2015, it will only take her 4 more months or less to clear her debt to clear it in full.

She will start her full-time job in June, debt-free and be able to save for everything she wants.

Without her debt, she will have an extra $3540 left each and every MONTH to put towards what she wants.

  • 10% for retirement
  • 5% for emergency fund
  • 5% for short-term savings

The rest of the money can be saved aside for her future kids, vacations, a new dog, or to increase her budget categories.

I really don’t want to presume anything but here’s an idea:

I know it sounds strange to save 20%, with 10% of it going to an EF and short-term savings, but I really like the idea of saving 10% – 15%, with 20% being the best if you can afford it.

Kate can always use the short-term savings towards her moving, furniture, car or house, and once the EF fund is fully funded she can stop and put the money elsewhere.

So what about kids?

Here’s what I see, assuming no changes in anything including inflation, job increases and so on, she will have to consider so many other variables:

  • Cost of each kid’s first year is $10,000 a year or $833.33/month, although Jacq says otherwise
  • Subsequent kid years are around $7000/year or $583.33/month as per Minimalist Mom
  • Update: Amy mentioned maternity leave which means a pay cut too
  • She’ll want to save for their college funds at perhaps $250/month per kid
  • Don’t forget childcare either.
  • Let’s not forget that she has to buy a home, and she should have $66,240 at $920/month saved
  • As a result of kids and a home, ALL of her bills will increase.
  • Her EF should be fully funded at only 3 months because her expenses have gone up to $4000/month
  • $4000 x 3 months = $12,000 required
  • $4000 x 6 months = $24,000 required
  • $4000 x 12 months = $40,000 required

The good news is that she will have a good income, this is just ONE income not two, and she’s already frugal.

Can anyone else give some help to Kate and point out things I missed or got wrong?

My brain hurts. 🙂

About the Author

Just a girl trying to find a balance between being a Shopaholic and a Saver. I cleared $60,000 in 18 months earning $65,000 gross/year. Now I am self-employed, and you can read more about my story here, or visit my other blog: The Everyday Minimalist.