A Beginner’s Guide to Budgeting and Saving

Like many other Latinos in the United States, I grew up hearing the following phrase countless times from my parents, uncles, and even grandparents: “If you have money, you should spend it.” For many years, whether I was bussing tables or working in a white-collar role, I believed this was the way to handle money. But over time, I realized that just because something is common in our community doesn’t mean it has to be our norm. In this blog, I will share some practical tips and strategies I’ve learned through trial and error to create and maintain a budget, as well as effective ways to save money in the United States using the popular 50/30/20 rule.

Let’s say you make $2,000 a month. How can you cover rent, food, insurance, health care, debt, send money back home, and still have some left for personal spending without running out? It sounds like a lot to manage, right? I used to think so too. But I found the answer in starting a budget. Getting started can be challenging, but trust me, it can be done!

How to Budget Money
It’s easy to feel overwhelmed by budgeting, but following these steps can make the process less intimidating:

1. Figure Out Your After-Tax Income
   If you’re paid by check or direct deposit to your bank account (you can do this via Coppel Access), your after-tax income is the net amount you take home. This is usually shown on the checks or statements your employer sends with each payment. If you receive payments in cash, make sure to account for any expenses like taxes or other costs you may need to cover. This will give you a clear picture of how much money you have to work with each month.

2. Choose a Budgeting System
   A budgeting system is your plan for managing your money. Everyone has different habits and needs, so choose a system that works for your lifestyle. For instance, the 50/30/20 rule is a great option to start with. It’s a personal favorite I picked up from friends and other financial education platforms like Nerdwallet. This method helps you cover all your needs, some of your wants, and—most importantly—savings for emergencies and the future. I’ll explain the 50/30/20 rule later in this post.

3. Track Your Progress
   Record your spending in a notebook, or, if you’re comfortable with technology, I recommend using an app like Rocket Money to track your expenses and savings. This will help you understand where your money is going and rethink your spending habits.

4. Automate Your Savings
   If possible, set up automatic transfers to put money aside for emergencies, investments, or future needs. Even if you’re sending money back home, always make sure you budget for your other expenses and savings. If automatic transfers aren’t an option, create a habit of setting money aside as soon as you get paid.

Try a Budgeting Plan
The 50/30/20 budget is a great way to maximize your money. Following this plan helps you manage expenses, debts, occasional indulgences, and hopefully save for unexpected expenses and/or retirement. Here’s how it works:

1. 50% of Your Income for Needs: Essentials like groceries, housing, basic utilities, transportation, insurance, sending money back home to family, and minimum loan payments fall under this category. If your needs exceed 50%, you may need to adjust your spending on wants temporarily.
   
   
2. 30% of Your Income for Wants: Wants can include dining out, entertainment, and other non-essential purchases. It’s okay to indulge, but remember to prioritize your needs and savings!
   
   
3. 20% of Your Income for Savings and Debt Paydown: Use this portion of your income to save for the future, the unexpected, and to pay off debt faster. This includes setting aside money for emergencies and making extra payments on loans.

Saving for the future
When budgeting, it can be tough to decide what’s most important. Here’s a list of priorities to guide you when thinking about saving for the future:

1. Toxic Debt: Focus on paying off high-interest debts, like credit cards and payday loans, first. These types of debt can quickly spiral out of control, and most carry high interest rates.
   
   
2. Emergency Fund: Start with a small emergency fund—at least $500—to cover unexpected expenses. This will help you avoid going into debt when something unexpected happens. Gradually build up your emergency fund to cover 3 to 6 months of essential living expenses. Ideally, opening a High Yield Savings account can help you do this by making  your money work for you. Just remember that saving up 3 to 6 months will take time, so try to be patient.
   
   
3. Employer Match on 401(k): If your employer offers a match on retirement savings, contribute enough of your paycheck to get the maximum match. This is essentially free money and will help you build wealth over time.
   
   
4. Retirement Savings: After these, now it’s time to start a retirement account. If possible, consider opening an IRA or a Roth IRA for additional tax benefits.

Take Control of Your Financial Future with Coppel Access

At Coppel Access, we’re committed to helping you build and maintain a strong financial foundation. With our FDIC-insured bank account and Visa debit card, you can confidently manage your money.

Start your journey with Coppel Access today!