Financial Literacy Program for New Refugees and Immigrants
© IFWF 2024
Lesson 1
Budgeting
01
About Us
What are your financial goals?
What would you do with the money you save?
Definitions
Budget— A plan for spending, earning, and saving money based on a person’s goals over a given period of time.
Cost of Living — The average cost of a variety of expenses for living, such as rent or home costs, transportation costs, insurance, utilities like natural gas and electricity and food.
Expenses — Money a person spends. Fixed expenses are money that you spend that are the same amount every time, such as rent or an electric bill.
Income — Money a person receives; gross income/net income.
Needs — The essentials of life—such as food and electricity.
Savings — Money set aside for financial goals.
Wants — Products or services that are not essential.
Fill in the blanks in the following paragraph with words above, using each word once:
Mario Estevar lives in Los Angeles, California. He earns_______from his job as a mechanic. Each week he spends money on a number of things. He gets groceries,pays bills, and other _______ . He’s been living in the USA for a long time, so now he earns enough money that some of it is for _______ , which he will use in the future for his daughter to go to college. Now that he earns more money, he also spends some of it
on going to the movies, taking his family out to dinner once in a while, and other _______ . Even though Mario is doing well, the _______ in Los Angeles is high, so he still tries to reduce his _______ when he can. For example, Mario’s family lives in an apartment instead of a house because it is cheaper. Things like this help Mario to stick to his _______ and plan for long-term success.
Example: The Abboud Family
1. The Abboud family recently arrived in the US and they need to make a budget. Please help them complete their budget.There is additional information about allowance, remittance, and entertainment below the table to help you complete the budget.
They have a total income of $1200 per month.
​
The Abboud family wants to send $50 each month to their family
(remittances). They also want to have $50 each month for entertainment with
the family.
For now, they are not planning on giving their children any money for
allowance. Can they do all of these things within their budget?
Fill in the budget chart above with the additional information about remittances,
entertainment, and allowance, then add to find the total cost of living. Compare the total monthly expenses to their total monthly income to tell if they are within their budget.
Example: The Estevar Family
The Estevar family has been living in the US for 3 years and they need to make a budget. Please help them complete their budget. There is additional information about allowance, remittance, and entertainment below the table to help you complete the budget.
They have a total income of $3000 a month.
They want to send at least $100 dollars a month to their family (remittances).
They also want to have at least $400 a month for entertainment.
​
They want to give each of their children at least $50 a month. They have two children.
​
Can they do all of these things within their budget? Fill in the budget above with the additional information about remittances and entertainment, then add to find the total cost of living.
​
Compare the total monthly expenses to their total monthly income.
​
1. What are the most important things for them to spend money on? What do you think they could spend less money on each month?
2. If you were the Estevars, what would you spend less money on, and how? For example, maybe you would spend less money on entertainment and put that money in savings.
​​
3. The $300 that the Estevars put in savings each month is so that they can have $20,000 for a house in 5 years. Should they save more than $300 a month to meet their goals?
12 months x 300 = ? x 5 years = ?
Example: Flores Garcia
1. It is common, especially upon first arriving to the United States, to make a different amount of money each week. For example, Flores Garcia works at a grocery store and makes $8 per hour after tax. This week Flores works 30 hours, so she makes 30x$8=$240 this week. In the four weeks of the month, she works 30 hours per week for two weeks and 25 hours per week for the other two weeks. What is Flores’ total monthly income if the grocery store is her only job?
The following equations can help you calculate the monthly income:
30 hours x $8 dollars per hour = $240 x 2= A
25 hours x $8 dollars per hour = $200 x 2 =B
A+B = monthly income
​
2. Next month, Flores gets a second job babysitting for a family on the weekends. They pay her $20 an hour, and she works for the family 12 hours each month (3 hours per week). What is Flores’ total monthly income, coming from both the grocery store job and the babysitting job?
12h x $20 = C
A+B+C = new monthly income.
​
3. The family that Flores works for sometimes asks her to work on Monday evenings as well. On those weeks she works an additional 2 hours, meaning that she could work up to 8 additional hours each month babysitting if they ask her to work all four Mondays in the month.
What is the lowest possible total monthly income Flores would make each month (no Monday babysitting)?
What is the greatest possible total monthly income Flores could make each
month (babysitting each Monday in addition to grocery store and weekend
babysitting)?
​
4. If Flores is making a monthly budget, should she assume her total monthly income will be the lowest possible or greatest possible from question 3? Why?
My Budget
Use the table below to create your own budget. If your income varies each week based on how much you work, make a budget for the lowest total monthly income you expect to make each month.
What are your savings goals?
How much can you save each month?
How much can you give to your children for allowance?
​​
Can you send money to your family?
Where will you put any extra money you make each month?
There are blank rows available for you to add any additional expenses you have each month.
Use the table below to create your own budget. If your income varies each week based on how much you work, make a budget for the lowest total monthly income you expect to make each month.
What are your savings goals?
How much can you save each month?
How much can you give to your children for allowance?
​
Can you send money to your family?
Where will you put any extra money you make each month?
The 50/30/20 Rule
When you first arrive in the United States, your financial situation may be unstable as you look for work and housing. Eventually, maybe after several years, a good goal to keep in mind is called the “50/30/20 rule.” The 50/30/20 rule says that 50% of your income should go to needs (rent,food,bills,medical expenses, transportation), 30% should go to wants (entertainment), and 20% should go to long-term savings.
For example, if your monthly income is $4,000, then following the 50/30/20 rule means that $2,000 per month goes to needs, $1,200 per month goes to wants, and $800 per month goes into long-term savings.
Again, this probably won’t be possible for a while after living in the United States while you’re getting settled. At first you may only be able to put $5-10 per month into long-term savings. This is just a goal to eventually work towards.More information on the 50/30/20 rule can be found here:
https://teachbanzai.com/wellness/resources/fifty-thirty-twenty
Planning for Emergencies
Sometimes, events happen that cause us to unexpectedly have less income. For example, the family that Flores babysits for could move, and now she would not get the additional $240-400 she makes each month (she would only have the $880 from the grocery store). If Flores’s needs cost $900 each month, then Flores’s income alone is not enough to cover her monthly expenses. She is $20 short every month. This is a situation where savings can help.
If Flores was able to put $20 in savings for emergencies only for one year, then after losing her babysitting job, she would technically have enough money to cover her needs for a year between the grocery store and the savings account.
Experts say that you should have enough money in savings to live off of for 7 months if possible. For example, if your total monthly expenses are $1,000, then you would want to have $7,000 in savings just in case you lose your job or some other kind of emergency. Most people don’t have 7 months of expenses in savings, and this probably won’t be feasible when you first arrive in the USA. In fact, it may take you years to save up that much money. That’s okay, it’s okay not to have that much yet, but it’s a good idea to start saving what you can for
possible future emergencies.
Budgeting for Education
One of the biggest costs you may want to budget for is a university education. In the United States, university education is not free. Different colleges have different costs, for example community colleges are cheaper than private universities. In addition, public universities in the state where you live are usually cheaper than universities in different states, this is called“ in-state tuition”. Not every state extends the in-state tuition cost to undocumented
immigrants living in the state, but some do (for example, California).
Having a university education typically allows you to get jobs that pay more, so saving for university now and attending university might allow you to make more money in the future. If you want to go to university or want to pay for your children to go to university, you should try and account for university savings in your budget, as it can be quite expensive depending on where you go.
Answer Key
-
Income; needs; savings; wants; cost of living; expenses; budget
-
The Abboud’s total cost of living is $1,110. Since their total monthly income is
$1,200, their total cost of living is less than their total monthly income. The Abbouds
are within their budget. -
The Abboud’s could save the money for emergencies, give their children allowance,
send the money to their family, start paying off their IOM loan (more information on IOM
loans will be given in a future lesson), or save the money to eventually be able to afford
to rent their own house or apartment. There are many things they could do with the
extra money. -
The Estevar’s total cost of living is $2,990. Since their total monthly income is
$3,000, their total cost of living is less than their total monthly income. The Estevars
are within their budget. -
It’s most important for the Estevars to pay for all of their needs, which are rent,
electricity, food, transportation, and medical expenses. Phone, loan payment, and
remittance are not technically needs, but they are still very, very important to pay. If they
want to, they could save money by spending less on entertainment and less on
allowance for the children. -
If the Estevars save $300 each month, then that means they save 12x$300=$3,600
each year. So after five years, they have saved, $3,600x5=$18,000 for the house.
They want to save $20,000 in five years, so in order to do that they will need to save
more than $300 each month. Maybe they can do this by spending less on
entertainment each month. -
Flores’ total monthly income is 2x30x$8=$480 plus 2x25x$8=$400. Her total
monthly income is $880. -
From babysitting Flores makes 12x$20=$240 each month. Added to her income
from the grocery store, her total monthly income is $240+$880=$1120. -
The lowest possible total monthly income is $1120, the money she makes from
weekend babysitting and grocery store. If she works every Monday of the month for 2
additional hours babysitting, she would make an additional 2x4x$20=$160 each month.
So Flores’ greatest possible total monthly income is $1120+$160=$1280. -
Flores should budget for $1120, not $1280. That way, if she isn’t asked to do extra
babysitting on Mondays, she is still planning for the amount of money she knows she
will make.