How to Save
and Make a
Budget
Latino Community Credit Union & Latino Community Development Center
Produced by and used with permission from:
Latino Community Credit Union & Latino Community Development Center
HOW TO SAVE AND
MAKE A BUDGET
Immigrants living in Arkansas with questions or
needing assistance with this topic should contact:
©
Copyright 2013 Latino Community Credit Union
TABLE OF CONTENTS
INTRODUCTION
3
MY SAVINGS GOALS
WHICH ACCOUNT IS BEST FOR EACH OF MY GOALS?
4
5
SAVINGS STORIES
ALAREK – COMPUTER
RACHEL – EMERGENCIES
MELISSA AND RODRIGO – BUYING A HOME
ANA MARÍA – EDUCATION
ROBERT – RETIREMENT
6
6
7
8
9
10
STEPS TO INCREASE MY SAVINGS
11
HOW TO MAKE MY BUDGET
HOW CAN I START?
COMPONENTS OF A BUDGET
WEEKLY EXPENSES TRACKING SHEET
MONTHLY BUDGET – WORKSHEET
12
12
12
13
14
MYTH BUSTERS
15
How to save and make a budget
Latino Community Credit Union
2
INTRODUCTION
DISCUSSION TOPIC
What are you currently doing to save money? What are your
challenges or concerns related to saving money?
Do you want to start saving money, but are not sure how?
Good money management starts with a good plan, or a budget. In this section, you will learn how
to make a budget to help understand and control your expenses and work toward your savings goals.
Remember, it’s never too late or too soon to start saving. Saving should become a daily habit in our
lives.
Following a budget and saving requires self-discipline and establishing good money management
habits. For example, if I need to make a specific purchase, I can save money in an interest bearing
account overtime, or on the other hand, I can pay with credit at a much higher cost. Whenever
possible, it is a good idea to get in the habit of planning and saving for specific purchases, rather
than paying with your credit card, especially if you cannot pay the balance at the end of the month.
DISCUSSION TOPIC
What is the first thing you should do after receiving your
paycheck?
Pay all of your bills and include them in your budget, and think of your savings as
another one of your monthly bills that should be paid before spending your money
on other things. It’s much better than saying, “First, I’ll pay all of my bills and
expenses, and if I have any money left over, I’ll save it.” This method seldom works.
How to save and make a budget
Latino Community Credit Union
3
MY SAVINGS GOALS
DISCUSSION TOPIC
What are your goals for yourself and your family? What do you want
to save for?
It is important to understand how you are currently spending your money, whether you are saving
enough or not, and how you can control your expenses to ensure that you can save enough for the
future.
Think about your goals for you and your family, so you can begin saving money to reach those
goals. Savings goals are different for each person or family. You should talk with your spouse and
your family and together decide what savings goals you what to achieve and when. For instance:
SHORT-TERM GOALS
Under 1 year
- Save for an emergency
fund
- Purchase a home
computer

EMERGENCIES

COMPUTER

EDUCATION

RETIREMENT

DOWNPAYMENT FOR A HOUSE
MID-TERM GOALS
1 to 5 years
- Down payment to buy a
house.
LONG-TERM GOALS
Over 5 years
- Education for the kids
- Retirement for my
spouse and me
Once you have set your goals, write them down, decide how much you need to save for each goal,
and decide where and how often you are going to deposit your savings.
How to save and make a budget
Latino Community Credit Union
4
WHICH ACCOUNT IS BEST FOR EACH OF MY GOALS?
There are different types of accounts to meet your needs:
 FOR SHORT-TERM GOALS, it is best to use accounts that allow you to withdraw the
money at any time without penalty, such as a regular savings or money market account.
 FOR MID-TERM AND LONG-TERM GOALS, think about using an investment account
with a higher rate of interest. Accounts with higher interest rates, such as certificates of
deposit, generally require that you keep the money in the account for a longer period of
time.
 FOR LONG-TERM SAVINGS GOALS , such as education and retirement, there are special
accounts. Look around at various financial institutions to find the right fit for you.
TYPE OF ACCOUNT
GENERAL INFORMATION
YOU MAY USE IT
FOR:
TRADITIONAL SAVINGS
Your money earns interest. You can make deposits and
withdrawals and close the account anytime .
Emergency fund,
short-term goals.
It earns more interest than the traditional savings
account. Usually it requires a higher minimum balance.
You can make deposits and withdrawals and close the
account anytime.
These are the savings accounts with the highest
interest. It usually requires a higher minimum balance
and you need to keep the money in the account for a
minimum of 6 months. During that time you cannot
make deposits or withdrawals and you cannot close the
account without penalty.
Your money is invested in stocks and mutual funds or
bonds. You can earn more interest but you could also
lose money.
There are many different options . The main advantage
of these accounts is that they offer tax advantages as
long as you use the money for the qualified expenses .
Emergency fund,
short-term goals.
ACCOUNT
MONEY MARKET
CERTIFICATE OF
DEPOSIT
INVESTMENT
ACCOUNTS
SPECIAL ACCOUNTS FOR
EDUCATION AND
RETIREMENT
How to save and make a budget
Mid-term and longterm goals.
Mid-term and longterm goals.
Education and
retirement.
Latino Community Credit Union
5
SAVINGS STORIES
ALAREK – COMPUTER
Alarek knows that a home
computer would be very helpful
for his son, Alejandro, who will
start high school next year. With
a computer, it will be easier for
Alejandro to finish his homework
assignments and do research on
the internet.
Alarek found a $550 computer that will meet their needs. Alejandro has already saved $200, so
Alarek will need to save $70 over the next 5 months to save the remaining $350.
SAVINGS GOAL: $70 X 5 MONTHS = $350
Since this is a short-term goal, Alarek will open a Money Market account, which earns more interest
than a regular savings account and allows him to withdraw the money when he needs it.
How to save and make a budget
Latino Community Credit Union
6
RACHEL - EMERGENCIES
Rachel typically paid her monthly expenses on time,
but was not in the habit of saving money.
Rachel was laid off from her job and was not able to
find work for four months. Since she had no savings,
she had to ask her family and friends for support
until she found a new job.
After this experience, she decided to start saving for
future emergencies
Since Rachel spends $1,000 each month, she needs to save between $3,000
and $6,000 for emergency use only. Rachel thought about how to decrease
her regular expenses, so that she would have more money to save for
emergencies. Rachel realized she could save $125 per month if she started
bringing her lunch to work every day, instead of buying it. So, Rachel’s
goal is to save $125 per month for two years, so that she will have $3,000
set aside for emergencies. Even after reaching her initial goal of $3,000,
Rachel will continue to build her emergency savings for the future.
Experts recommend
saving three to six
months of your
monthly expenses
(rent, food, bills,
etc.) saved in case
of an emergency
SAVINGS GOAL: $125 X 24 MONTHS = $3,000
For emergency savings, it is generally recommended that you deposit your money in an account that
earns interest and allows you to withdraw your money at any time, such as a traditional share or
savings account. Another good option is a Money Market account, which usually earns a higher
interest rate than a traditional savings account, but has a higher minimum deposit requirement.
How to save and make a budget
Latino Community Credit Union
7
MELISSA AND RODRIGO – BUYING A HOUSE
Melissa and Rodrigo have decided they
want to buy a home where they can raise
their new baby. They sat down with a
loan officer at their financial institution to
find out how to start saving for their new
home.
Melissa and Rodrigo need to consider all of the initial costs involved in buying a new home:
DOWN-PAYMENT
CLOSING COSTS
This will be the biggest upfront
cost to purchase a home. The
more Melissa and Rodrigo are
able to put down toward the
house, the less they will have to
pay each month on their
mortgage loan.
These are costs Melissa and
Rodrigo will pay when they sign
the final papers for their new
home. These costs are usually
about 3% of the price of the
home.
OTHER FEES
Melissa and Rodrigo should
save for other costs, such as
moving costs and furniture as
necessary.
Melissa and Rodrigo reviewed all of these costs with their loan officer and determined that they will
need to save $10,000 to purchase their new home. They have already saved $5,000, so they will
need to save an additional $5,000, or $277.78 per month over 18 months, to reach their goal.
SAVINGS GOAL: $277.78 X 18 MONTHS = $5,000
Since this is a mid-term goal (1-5 years) and Melissa and Rodrigo already have $5,000 saved, they will
deposit their money into a Certificate of Deposit (CD) that earns more interest than a regular
savings or a money market account. In exchange for the higher interest rate, Melissa and Rodrigo
will keep their money in the account without making any withdrawals for a certain period of time
(18 months).
How to save and make a budget
Latino Community Credit Union
8
ANA MARÍA - EDUCATION
Ana María has a child named Sofia who is 2 years old.
She is concerned about how and when to start saving
for her college education. She has 16 years to save for
Sofia’s education. However, the sooner she starts
saving, the more money she will have when Sofia is
ready to enter college.
Ana María calculated that expenses for a 4-year public university in 16
years will be approximately $200,000. Her goal is to save 33% of that
amount ($66,000). She could cover the remaining costs through her
current income or financial aid as well as loans if necessary.
So, Ana María will need to save approximately $2,950 per year (or $246
per month) in an account with a 4% interest rate over 16 years to reach
her savings goal for Sofia’s education. Ana María should revisit this goal
later to determine if she is able to save more per month.
Since it is difficult for
most parents to save the
entire amount for their
child’s education, experts
recommend parents save
at least 33% to 50% of
the projected costs of the
child’s educational
expenses.
SAVINGS GOAL: $246 (4% INTEREST) X 16 YEARS = $66,000
Ideally, parents should start saving for their child’s education at birth. Experts recommend either
10% of your paycheck, or $2,500 per year (or $50 per week). If that is too difficult for your family at
this time, start saving as much as possible, even if it is just $15 to $25 a month.
The two most common accounts to save for education are 529
college savings accounts and Coverdell Education Accounts.
These accounts earn interest and allow you to save money for
your child’s education with tax advantages. The deposits you
make into the accounts are tax- deductible, but when you
withdraw the money to pay for your child’s higher education
expenses, you do not have to pay taxes on that money.
How to save and make a budget
There are many calculators
available on the Internet to help
you estimate the costs of your
children´s education and how
much you would need to save.
Example:
http://www.finaid.org/calculators/
Latino Community Credit Union
9
ROBERT – RETIREMENT
Robert knows that he cannot rely on
Social Security benefits when he retires.
He is 30 years old and is
concerned that he has not yet begun to
save for retirement. Robert learned
that it is best to start saving soon to take
advantage of compound interest, which
means he will earn interest on his
deposits and on the interest his
deposits earn as well.
For example, if Robert starts today, at 30 years old, saving $175 per month, with a 6% average interest
rate, he will save $234,013 by the time he is 65 years old. But, if he waits to save until he is
45 years old, he will only save $77,249!
Monthly Deposit
Amount
Age started
to save
Average Rate
of Return
Total amount saved
by 65 years old
$175
30
6%
$234,013
$175
45
6%
$77,249
The traditional Individual Retirement Account (IRA) and the Roth IRA account earn interest and have
different types of tax advantages. You can open these accounts with a valid Social Security Number or
Individual Tax Identification Number.
Some employers offer a tax-advantaged 401(k) or 403(b) plan. You can contribute money and some
employers will match your contributions up to a certain amount/percentage. This is an excellent option
if it is available to you.
How to save and make a budget
Latino Community Credit Union
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STEPS TO INCREASE YOUR SAVINGS
1. Open a traditional savings or money market account.
2. Think about ways to reduce your expenses. For example, do not
buy your lunch, use discount coupons, and make a shopping list.
3. Develop a plan to pay off your debts – the money you owe on your
loans or credit cards. Start using your credit card only when you can
pay off your balance at the end of the month.
4. Set your savings goals and save a certain amount of money each
month. Think about starting savings accounts for emergencies,
retirement and your children’s education.
5. Always pay your bills on time to avoid fees. Pay more than the
minimum payment on your loans to save money in interest.
6. If you think you are paying too much interest on a loan, ask about
refinancing. Your financial institution might be able to offer a better
interest rate.
7. Do not use cash checking stores, pawn shops, or stores that let
you rent furniture while you buy them. These services can end up
costing you a lot of extra money.
How to save and make a budget
Latino Community Credit Union
11
HOW TO MAKE MY BUDGET
A budget helps you understand and control your expenses while establishing and working toward
your savings goals.
Take control of your
spending.
Prepare for planned or
unexpected expenses.
BUDGET
Plan and achieve your
savings goals (for
example, education and
retirement)
Reduce the need for
credit.
HOW CAN I START?
You can make a weekly or monthly budget. Save and organize your receipts and bills to track where
you spend your money. In the following pages we have included two worksheets to help you prepare
your weekly expenses tracking sheet and your monthly budget.
COMPONENTS OF A BUDGET
INCOME: Any money that comes into your household, either from full-time or parttime work or odd jobs.
EXPENSES: Money spent on food, clothes, bills, and other purchases.
DEBT: Money owed to another person or a company, for example, loans or credit
cards.
SAVINGS GOALS: Include your family’s short, medium and long-term savings goals in your
budget, so you can be sure to start saving a certain amount of money each
month.
Check the following: Is your income more than your expenses? If not, this means you are
spending more than you take in, so you need to reduce your expenses!
How to save and make a budget
Latino Community Credit Union
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WEEKLY EXPENSES TRACKING SHEET
Sometimes, it can be easier to control your expenses if you track them on a weekly basis.
Item
Groceries
Restaurants
Child care
Laundry
Gas / Transportation
Clothing
Cigarettes / Alcohol
Entertainment
Home/Garden
Medical
Gifts
Charity / Church
Savings
Other
Weekly Expense Total
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
Total expenses
MONTHLY BUDGET —WORKING SHEET
Category
Expenses
Monthly expenses
Rent/mortgage
Insurance/taxes
Home maintenance
HOUSING
Gas/electric
Income source
You
Spouse
Job (net salary)
Part-time job (net salary)
Government benefits
Unemployment insurance
Water/Sewer/Garbage
Telephone/Cell phone
Internet/Cable
FOOD
Groceries/ Household
Support from family/friends
Other
Total monthly income
Insurance
MEDICAL COSTS
Doctor visits
Prescriptions
Auto insurance
Registration and taxes
TRANSPORTATION
Gas
Maintenance/Repairs
Public transportation
Day care
CHILD CARE
Clothing for kids
Schools Supplies
TAXES
Prior Year
Loan Payment
DEBT
Savings
Monthly savings
Emergencies
Education
Retirement
Other
Total monthly savings
It is easy to calculate your own budget!
Estimate your total monthly expenses and income and
then subtract them to calculate the balance. Don’t
forget to include the money you save each month.
For some of your monthly expenses, you may need to
calculate the annual amount and divide by 12.
Credit card
PERSONAL
ENTERTAINMENT
Barber/haircut/beauty
Total income
Clothing/Jewelry
- Total expenses
-
Movies/concerts/theater
- Total savings
-
Restaurants
= Monthly balance*
=
Vacation/travel
Money sent to family
Phone cards
MISCELLANEOUS
Gifts
Cigarettes/alcohol
Contributions charity
Other
Congratulations—you completed your budget!
*If your balance is positive, you should strongly
consider adding the extra money to your savings to
reach your goals sooner. If your expenses exceed
your income, you will need to figure out how to cut
more expenses (or increase your income)
Total Monthly Expenses
How to save and make a budget
Latino Community Credit Union
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MYTH BUSTERS
I will never be able to stick to a budget.
You will likely be surprised, especially if you
and your family agree to do it together!
I do not earn enough income to save any
money.
Anyone can save money! Even saving a very
small amount can add up. If two people in
the family save just $10 a week, at the end of
the year, you will have saved more than
$1,000.
My employer does not offer retirement
packages, so I cannot save for retirement.
You can open a special retirement account for
yourself, such as an Individual Retirement
Account (IRA). Ask your financial institution for
help.
My child is so young, I don’t need to start
saving for education yet.
It is best to save money for education little by
little. The cost of higher education at a fouryear university is continuing to increase. If you
put your money into a tax-advantaged
account with a good interest rate, you could
be well on your way to being sure that your
children will be able to attend the school of
their choice.
How to save and make a budget
Latino Community Credit Union
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GOALS – SAVING AND BUDGETING
The following are some possible action items that you might be interested in taking to start
putting into practice what we have discussed! Please check the goals below that you are
interested in completing for the next session.
Possible Goals
Write your savings goals.
Complete the Weekly Expense Tracking Sheet.
Complete the monthly Budget worksheet.
Ask various financial institutions about their savings accounts
and their interest rates.
If you already have a savings account, see if you can find an
account that will allow you to earn a higher interest rate.
Decide on a monthly savings goal, for example $10 per
month, for emergencies.
Open an account and begin automatically depositing this
amount into your account on a monthly basis
If you have consumer debt, develop a plan to pay it off.
If you have a car or home loan, see if you are paying a
reasonable interest rate. If not, consider refinancing to save
money.
Review your budget to see if there are ways you might be
able to reduce your expenses.
If you have children, open an education savings account.
Check with your employer to see if they offer any kind of
retirement savings account. If so, consider contributing to
this account.
Your Goals and Timeframe: