Managing your money and expenses:
“Family Financial Literacy” A MANUAL FOR HABITAT FOR HUMANITY BORROWERS
The Family Expense Notebook NAME:
.EGRO # #
Managing your money and expenses “Family Financial Literacy” A MANUAL FOR HABITAT FOR HUMANITY BORROWERS 2nd Edition revised April 2007. Credits Funding: Citigroup Foundation
Index EXERCISE #1............................................................................................................... 4 What do I spend or invest my money on?..................................................................4
EXERCISE #2......................................................................................5 Proposal Designers, Financial Literacy Project Chris Little Lee Martin Project Coordinator: Mario A. Morán Text: Giovanna Núñez Design and Illustration: Alma Creativa Translator: Meghan Callan-Hinsvark Printing Jiménez & Tanzi
Expense or Investment?....................................................................................................5
EXERCISE #3......................................................................................6 Characteristics of a Habitat Loan...................................................................................6
EXERCISE #4......................................................................................7 List of Family Expenses......................................................................................................7
EXERCISE #5......................................................................................13
Document revisors and trainer workshop facilitators: Habitat for Humanity International (Latin America and the Caribbean): Belinda Florez, Lina María Obando, Marco Montemayor, Enrique Montero, Pablo García, Juan Ochoa, Juan de Dios Valdez y Judith Hamje. Habitat El Salvador: Hugo Ochoa, Beatriz Bejarano. Habitat Guatemala: Mario López, Juan Carlos Hernández. Country-level Logistics and coordination for project implementation: Habitat Colombia: María Cristina, Carlos González. Habitat Chile: Loreto Barriga y Eloisa Gutiérrez. Habitat Guatemala: Olga García, Alma Ochoa y Hender Gaitán. Habitat República Dominicana: Alejandro Santana, Genarina Santos. Habitat for Humanity International Latin America and the Caribbean. www.habitat.org Telephone: (506) 296 8120 Fax: (506) 291 7475 P.O. Box: 1513-1200 Pavas San José Costa Rica ISBN: 978-9968-9580-6-6
Family Income Chart..........................................................................................................14
EXERCISE #6......................................................................................15 Sample Monthly Family Expenses Chart.....................................................................15 Exercise #6 Monthly Family Expense Chart................................................................16
EXERCISE #7......................................................................................20 Sample Monthly Family Budget.....................................................................................20 Exercise #7 Monthly Family Budget..............................................................................21
EXERCISE #8......................................................................................20 Payment Capacity...............................................................................................................20 Exercise #8 Payment Capacity........................................................................................21
GLOSSARY.........................................................................................25
Introduction The Family Expense Notebook is a fundamental auxiliary tool, to be used alongside The Manual for HFH Borrowers. You have a right to a better quality of life; this book is designed for those of you interested in improving your housing conditions. Careful use of this tool will help you manage your money and expenses. Within, you’ll find 8 basic tools and exercises: Expense or Investment, Characteristics of a Habitat Loan, Family Expense Chart, Family Income Chart, Monthly Family Expense Chart, Monthly Family Budget Chart, y Payment Capacity all of which you’ll remember from The Manual for HFH Borrowers. They’re for you to fill out with your family, making notes and keeping records of your income and expenses – activities that will help you increase your monthly savings.
Incorporate these tools into your daily routine, and you’ll see: You are the owner of your own future!
The Family Expense Notebook
Exercise # 1 What do I spend or invest my money on? How do I spend my money?
How do I invest my money?
Stereo Equipment
Foreign Language classes for my children
Movie Tickets
Community Savings Payments
Drinks for a Party
School Books
Day 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Go over the answers with your family
Exercise # 2 Check whether it is an expense or an investment Expense
Investment
• Buying Property. • Buying new curtains. • Fixing my roof. • Loan payments on my house. • Paying Rent. • Moving Expenses. • Helping my neighbor build with Habitat. • Buying school books. • • Add more
•
examples
• • •
Look over the answers with your family The Family Expense Notebook
Exercise # 3 Characteristics of a Habitat Loan Find the correct response. • We suggest that you complete the following exercise to reinforce ideas talked about in the section that you just went over about the characteristics of a habitat loan. • Take a look at the following chart. In the left column is a list of the characteristics of a habitat loan. In the right column, all jumbled up, are the answers that correspond to each characteristic. Draw a line between the characteristic and it’s appropriate description. Follow the example.
Characteristics of a HFH Loan
Response
Family Involvement.
o Money that is returned to Habitat through loan payments, which is then used to build
Cost of protecting the revolving fund.
o Trainings for potential borrowers that covers the loan process, construction, mutual
Cost of the loan.
more houses.
help, etc.
o Loan given in goods or services, not cash.
Down Payment.
o Loans without profit.
Loan that is adjusted to fit the payment capacity of each family.
o Through mutual help borrowing families come together and participate in sweat
Non-profit. Revolving Fund.
o Habitat only recovers the expenses used in construction, loan administration and
In-kind Loans.
Indirect Costs of construction.
borrowing families is deposited and which protects it from devaluation.
o The value, payments, and payment plans are adjusted to fit the payment capacity of each family.
o First or initial payment of a loan which the borrower pays that gives confidence to
Community Organization.
community.
o Charge that the borrower pays which safeguards the fund where money from other
upkeep, and the cost of protecting the revolving fund from devaluation.
o Work between the families and neighbors to improve the development of their
Technical Assistance.
equity while working with Habitat to build houses.
Habitat that the borrowing family will be serious and responsible with their loan.
o Includes expenses to grant and administer the loan, as well as other administrative
expenses, such as home visits, transportation, paperwork, trainings, etc.
• We recommend that you talk with your family about the characteristics of a Habitat loan and the possibility that your family could be granted one.
Exercise # 4 Make a list of your expenses each day until you have completed a week, two weeks or month and add them up. LIST OF FAMILY EXPENSES
Day
AMOUNT
DATE:
NECESSARY:
MONTH/DAY
YES OR NO
Daily Busfare
15
JULY 3
Meals for the week
65
JULY 7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
TOTAL
MES:
The Family Expense Notebook
Exercise # 4 Make a list of your expenses each day until you have completed a week, two weeks or month and add them up. LIST OF FAMILY EXPENSES
Day
AMOUNT
DATE:
NECESSARY:
MONTH/DAY
YES OR NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
TOTAL
MES:
Exercise # 4 Make a list of your expenses each day until you have completed a week, two weeks or month and add them up. LIST OF FAMILY EXPENSES
Day
AMOUNT
DATE:
NECESSARY:
MONTH/DAY
YES OR NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
TOTAL
MES:
The Family Expense Notebook
Exercise # 4 Make a list of your expenses each day until you have completed a week, two weeks or month and add them up. LIST OF FAMILY EXPENSES
Day
AMOUNT
DATE:
NECESSARY:
MONTH/YEAR
YES OR NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
TOTAL
10
MES:
Exercise # 4 Make a list of your expenses each day until you have completed a week, two weeks or month and add them up. LIST OF FAMILY EXPENSES
Day
AMOUNT
DATE:
NECESSARY:
MONTH/DAY
YES OR NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
TOTAL
MES:
The Family Expense Notebook
11
Exercise # 4 Make a list of your expenses each day until you have completed a week, two weeks or month and add them up. LIST OF FAMILY EXPENSES
Day
AMOUNT
DATE:
NECESSARY:
MONTH/DAY
YES OR NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
TOTAL
12
MES:
Exercise # 5 FAMILY INCOME CHART
MONTH: JULY
Family Members
Amount
Fred
600
Claire
200
Charlie
300
Mary
100 TOTAL
FAMILY INCOME CHART
Week Nº: 1
1200
MONTH:
Family Members
Week Nº: 1
Amount
TOTAL
FAMILY INCOME CHART
MONTH:
Family Members
Week Nº: 2
Amount
TOTAL
FAMILY INCOME CHART
MONTH:
Family Members
Week Nº: 3
Amount
TOTAL
The Family Expense Notebook
13
Exercise # 5 FAMILY INCOME CHART
MONTH:
Family Members
WEEK Nº: 4 Amount
TOTAL
FAMILY INCOME CHART
MONTH:
Family Members
WEEK Nº: 5 Amount
TOTAL
FAMILY INCOME CHART
MONTH:
Family Members
WEEK Nº: 6 Amount
TOTAL
FAMILY INCOME CHART
MONTH:
Family Members
Amount
TOTAL
14
WEEK Nº: 7
NECESSARY
EXPENSES (NE)
30 210
15
65
100
1
30
10
20
2
15
15
3
50
30
20
4
185
25
160
5
UNNECESSARY
Movies
EXPENSES (UE)
The Family Expense Notebook
(NE+UE)
TOTAL EXPENSES
TOTAL UE
Birthday Party
New Television
Miscellaneaous
Eating out
310
100 100
1
30
2
15
3
100
50
50
4
225
40
40
5
6
110
50
50
6
20 60
15
25
JOHNSON FAMILY
UNNECESSARY EXPENSES (UE)
TOTAL NE
Personal Hygiene
Books
Transportation
Health
Light
Food: Lunch
Family Food
Donations
University
Schools
Rent
FAMILY INCOME PER MONTH:
125
7
125
125
7
8
8
9
9
10
10
$1200 a month
20
11
20
20
11
13
13
60
14
60
20
40
14
15
15
16
16
17
17
60
18
60
20
40
18
19
19
AMOUNT SPENT (AS)
20
20
MONTHLY FAMILY EXPENSE CHART
21
21
20
22
20
20
22
40
40
40
23
23
15
24
15
15
24
20
25
20
20
25
26
26
27
27
28
28
50
29
10 50
40
29
55
35
35
30
20
20
30
31
31
1255
90 85 40 100 315
TOTAL
65 40 145 125 60 940
245
160 100
TOTAL
Exercise # 6
15
Exercise # 6
MONTHLY FAMILY EXPEN
FAMILY INCOME PER MONTH:
AMOUNT SP
NECESSARY EXPENSES (NE)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1
Rent Schools University Donations Family food Food: Lunches Electricity Water Telephone Transportation Health
TOTAL NE
UNNECESSARY EXPENSES (UE) UNNECESSARY EXPENSES (UE)
Movies Eating out
TOTAL UE TOTAL EXPENSES
16
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
16
17
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
TOTAL
TOTAL
The Family Expense Notebook
17
Exercise # 6
MONTHLY FAMILY EXPEN
FAMILY INCOME PER MONTH:
Amount Sp
NECESSARY EXPENSES (NE)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1
Rent Schools University Donations Family food Food: Lunches Electricity Water Telephone Transportation Health
TOTAL NE
UNNECESSARY EXPENSES (UE) UNNECESSARY EXPENSES (UE)
Movies Eating out
TOTAL GI TOTAL GASTOS
18
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
LIARES MENSUAL
Gastada (CG) 16
16
17
17
18
18
19
19
20
20
21
21
22
22
23
23
24
24
25
25
26
26
27
27
28
28
29
29
30
30
31
31
TOTAL
TOTAL
The Family Expense Notebook
19
Exercise # 7
MONTHLY FAMILY BUDGET
MONTHLY FAMILY BUDGET
JULY 2006
Budget for the month of:
1200
Family Income:
SAMPLE FAMILY BUDGET OF THE JOHNSON FAMILY
Monthly expenses
Budgeted Amount
Amount Spent
Savings/Deficit
Rent
160
160
0
School/University
100
100
0
0
0
0
Family Food/ Snacks
230
245
-15
Electricity
60
65
-5
Water
0
0
0
Telephone
0
0
0
Transportation
200
125
75
School Books
50
125
-75
Personal Hygiene
90
80
10
Health
50
40
10
Clothing, Shoes
0
0
0
Movies
25
0
25
Eating out
80
90
-10
Payments for new television
40
40
0
Birthday Party
55
100
-45
Other: Miscellaneaous
60
85
-25
1200
1255
-$55.00
Nececssary Expenses
Donations
Unnecessary Expenses
Total
TOTAL INCOME
:
1200
• Positive: Your savings capacity
20
– TOTAL EXPENSES:
1255
=
-55
• Negative: you are spending more than you make.
Exercise # 7
MONTHLY FAMILY BUDGET
SEM
Monthly Family Budget Budget for the month of: Family Income: 1)
Expenses
Budgeted Amount
2)
(3)
Amount Spent
Savings/Deficit
Necessary Expenses Rent School/University Donationss Family Food/ Snacks Electricity Water Telephone Transportation School Books Personal Hygiene Health Clothing, Shoes
Unnecessary Expenses Movies Eating Out
Total
TOTAL INCOME:
• Positive: Your savings capacity
– TOTAL EXPENSES
:
=
• Negative: you are spending more than you make. The Family Expense Notebook
21
Exercise # 7
MONTHLY FAMILY BUDGET
SEM
PRESUPUESTO FAMILIAR MENSUAL Presupuesto para el mes de: Ingresos de la familia:
Expenses
1)
2)
(3)
Budgeted Amount
Amount Spent
Savings/Deficit
Necessary Expenses Rent School/University Donationss Family Food/ Snacks Electricity Water Telephone Transportation School Books Personal Hygiene Health Clothing, Shoes
Unnecessary Expenses Movies Eating out
Total
TOTAL INCOME:
• Positive: Your savings capacity
22
– TOTAL EXPENSES
:
=
• Negative: you are spending more than you make.
Exercise # 8 Payment Capacity Recommendation: To complete this exercise you must have completed all the previous exercises and found a way to be saving more than you are spending.
Think about the exercise on page 44 of the Family Financial Literacy Manual: You and your family have a monthly income of $1200 and you have a created a budget with a projected $850 in expenses. Let’s say that you find at the end of the month that you only spent $800, what would your payment capacity be? Do the following equation: 1200-800=400 Your family payment capacity would be $400. Now, what would happen if you were to invest that $400 in a loan? Or, if there was a family emergency, could you take care of it without putting your family in debt? Keeping possibilities like this in mind, we recommend that you allocate a maximum of 60% of the $400 towards the loan. In other words, this would mean $240 would go towards loan payments and $160 (40% of your payment capacity) would be for your family savings. This way, you and your family would have some sort of financial support for any unforeseen situations/expenses that may arise.
Real family expenses
Real family income
+
Budgeted payment capacity Total income
+
Savings for unforeseen items Payment capacity Total income
The Family Expense Notebook
23
Exercise # 8 • Family’s monthly income:
Income:
• Sum up the family’s monthly expenses:
Expenses:
• Subtract the following: Income – Expenses
Income:
– Expenses:
this is your remainder and payment capacity.
=
Now with the remainder let’s do some calculations:
Remainder:
Multiplied by 60 % =
Remainder:
Multiplied by 40 % =
this is the amount you could use to make the loan payments to Habitat.
this is the amount that remains to take care of any unforseen situations.
• Family’s monthly income:
Income:
• Sum up the family’s monthly expenses:
Expenses:
• Subtract the following: Income – Expenses
Income:
– Expenses:
=
this is your remainder and payment capacity.
Now with the remainder let’s do some calculations:
Remainder:
Multiplied by 60 % =
Remainder:
Multiplied by 40 % =
this is the amount you could use to make the loan payments to Habitat.
this is the amount that remains to take care of any unforseen situations.
What did you think of this exercise? You did the exercise with your own family’s information and this demonstrates the possibility of taking out a loan with Habitat or not.
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Glossary Collateral. It is any real estate (land), other property (furniture, equipment) , or person (guarantor), that supports the loan agreement made with Habitat. Community organization: Habitat is interested in creating conditions in which everyone can have an adequate place to live. Habitat builds and improves housing with the participation of the borrowing families, who help build their own homes and participate in community development activities. Controlling your Expenses. We’ve seen the importance of being consistent and honest with ourselves. This is demonstrated when we agree to responsibly manage the family’s expenses and thus are able to save the proposed amount needed to reach our goals. For example, in the previous section we saw that Fred changed one of their family’s traditions to comply with their savings plan by taking the family out to eat once a month rather than every Sunday. Credit History. This is how your family has dealt with their previous responsibilities to repay other loans you have taken out in the past. That is, did the family complete and not default on the payment of the loan within the committed timeframe? Devaluation. This is when flucuations in a country’s currency effects the value of one’s assets, like stock, bank accounts, etc., causing their value to lower. Family Budget A budget is an itemized plan of our income and expenses. The budget helps us see how much money we make, where it goes and how to balance our income with our expenses. It is a very important tool that disciplines, organizes and allows us to see if we have the payment and saving capacity that we need to invest in our goals- for example, improving your house. Family stability: My current house or property should be an adequate, safe place where the home construction or improvement project may be carried out. Habitat For Humanity Habitat for Humanity is a movement involving volunteers, churches, businesses, NGOs, the government and families, all working towards eradicating substandard housing. Indirect Costs. These are costs incurred by Habitat to facilitate the loan approval process, sweat-equity monitoring, improvement of your iving conditins and servicing the loan. Some examples of this would be, the cost of processing paperwork, credit evaluations (home visits), family training, office administration and operating costs, as well as a charge to protect the revolving fund from devaluation.
The Family Expense Notebook
25
Loans for complete housing solutions. This type of loan provides the funds necessary to build a complete, simple, safe, and affordable home in accordance with the borrowing family’s payment capacity. Loans for gradual house construction. This is a viable option for those families who do not have the ability to assume a loan for a complete house. A house may be built gradually, in stages, in which case the loan should be adjusted to accomodate each phase of construction. Loans for home improvement. This loan provides the funds necessary for carrying out a wide variety of home improvements or repairs, such as: additions, water and sewer connections, reinforcing main structures, floors, roof repairs, changing electrical installations, plumbing, etc. These loans are smaller, and have a shorter repayment period. Managing unforeseen situations. We know that unforeseen situations come up when you least expect them; you have to be prepared to cope with and overcome them so they do not interfere with your commitment to Habitat. Mortgage. For example, when Habitat grants me a loan to build or remodel my home I turn my property over to them in a legal document. This way my house and land become a guarantee for Habitat so that they may recover the money it invested in my family should I not complete my payments. Need for a house: The family lives in substandard housing in accordance with their community and country, and they lack the necessary resources to improve their living conditions on their own. In addition, the family does not qualify for loans from banks or other commercial credit institutions. Non-Profit Loan. A loan that does not charge anything beyond the value of the loan plus the expenses involved in servicing it. Non-profit organization: An organization that is not interested in benefiting financially from the loans it provides its borrowing families. Habitat wants low-income families to be able to improve their living conditions. Payment Capacity. The family has sufficient family income to cover its basic needs (family expenses), current debts and the future loan payments that would come about from the Habitat loan. The construction or remodeling are in accordance with the family’s ability to pay.
26
Project feasibility: In order for the building or remodeling to take place, the proposed site should be located in a risk-free area, and it must be feasible for the project to take place at the time the family applies for the loan. Also, the family must demonstrate legal ownership of the land on which the building or remodeling will take place. Repayment character and integrity. The way that the family meets the commitments it has made to repay a loan is is something that must be handled responsibly. Since Habitat promotes the active participation of the family through sweat equity and mutual help, it is important that the family understands and analyzes how and why to participate responsibly. Responsibilities. We are referring to the commitment to make the payments, on time and for the amount agreed upon with Habitat. That’s why the amount is part of the budget’s fixed expenses for the family, since it cannot be used for anything else, changed or ignored. Remember that you cannot use this money for any other purpose; the payment is mandatory. Think of it this way: the responsibility lies in being aware that if you do not the payments, another family will be unable to build their own house, and you may lose yours. Revolving fund: A fund consisting of money contributed by Habitat International. The revolving fund is sustained by the punctual loan payments made by the borrowing families back to Habitat. This fund is used to grant more loans and help improve the living conditions of more families. Savings Having savings means that you have money immediatly available, and which doesn’t lose value over time.. Willingness to pay. This does not depend on the amount of income a family makes (be it a little or a lot) but rather on the responsibility that each person or family assumes to comply with their payment obligations. For example, Charlie paid off his debt at the store when he received his first pay check, despite the fact that he doesn’t make much money at his temporary jobs.
The Family Expense Notebook
27
28
Notes
The Family Expense Notebook
29
Notes
30
This is our family’s commitment to manage our money and expenses:
The Family Expense Notebook
31
Habitat for Humanity International Latin America and the Caribbean www.habitat.org Telephone: (506) 296 8120 Fax: (506) 291 7475 P.O. Box: 1513-1200 Pavas San José Costa Rica
