Introduction
Do you often wonder where all your money goes by the end of the month?
You get your salary, pay bills, buy groceries, enjoy a few outings and suddenly, the money is gone. If this sounds familiar, you are not alone. Many people struggle with money management because they don’t follow a proper plan.
That’s where a monthly budget comes in. A budget is nothing complicated, it’s simply a plan that shows how much money comes in (income) and how much goes out (expenses).
With a budget, you can control spending, avoid unnecessary debt, and save more.
If you are new to budgeting, don’t worry. This step-by-step guide will help you create your first monthly budget in rupees simple, practical, and easy to follow.
Table of Contents
Step 1: Know Your Income
The first step in making a budget is to figure out how much money you actually earn every month. This is your net income (money you take home after taxes and deductions).
- If you are a salaried person, check your salary slip or bank account.
- If you are self-employed or earn from multiple sources (like freelancing, tuition, or rent), calculate your average monthly income.
Example: Ramesh earns ₹45,000 per month from his job and ₹5,000 from freelance work so His total monthly income = ₹50,000.
Step 2: List Your Fixed Expenses
Fixed expenses are those that stay the same every month. These are non-negotiable and must be paid on time.
Common fixed expenses include:
- House rent / EMI
- Electricity and water bill
- Internet and mobile bill
- School fees (if any)
- Insurance premiums
Example:
- Rent: ₹12,000
- Electricity + water: ₹2,000
- Internet + mobile: ₹1,000
- Insurance: ₹2,000
Total Fixed Expenses = ₹17,000
Step 3: List Your Variable Expenses
Variable expenses change every month. They depend on your lifestyle and spending habits.
Examples of variable expenses:
- Groceries
- Travel (petrol, bus, metro, cabs)
- Eating out and entertainment
- Shopping (clothes, gadgets, etc.)
- Personal care
Example:
- Groceries: ₹6,000
- Travel: ₹3,000
- Eating out: ₹2,000
- Shopping: ₹2,000
Total Variable Expenses = ₹13,000
Step 4: Add Savings and Investments
A budget is not complete without savings. After all, your hard-earned money should also work for you. Set aside money for:
- Emergency fund
- Retirement savings (PF, PPF, NPS, mutual funds)
- Short-term goals (vacation, gadgets, etc.)
Try to save at least 20% of your income every month.
Example:
Ramesh decides to save ₹10,000 (20% of ₹50,000).
Step 5: Compare Income and Expenses
Now, add up all your expenses (fixed + variable + savings) and see if they fit within your income.
Ramesh’s Budget Example:
- Income: ₹50,000
- Fixed expenses: ₹17,000
- Variable expenses: ₹13,000
- Savings: ₹10,000
Total = ₹40,000
Ramesh still has ₹10,000 left for extra savings, leisure, or emergencies.
If your expenses are more than your income, it means you are overspending but Don’t worry you can fix this in the next step.
Step 6: Cut Unnecessary Expenses
If you spend more than you earn, you need to trim expenses. Look at your variable expenses first because they are flexible.
Tips to cut costs:
- Cook at home instead of eating out too often.
- Use public transport or carpool to save petrol.
- Cancel subscriptions you don’t use (OTT, gym, apps).
- Shop only what you need, not what you want.
Even small changes can save you ₹2,000–₹5,000 every month.
Step 7: Follow the 50-30-20 Rule (Optional but Helpful)
This popular rule makes budgeting simple. Divide your income like this:
- 50% on needs (rent, groceries, bills)
- 30% on wants (shopping, eating out, entertainment)
- 20% on savings (investments, emergency fund)
Example (with ₹50,000 income):
- Needs: ₹25,000
- Wants: ₹15,000
- Savings: ₹10,000
Step 8: Track Your Spending
Making a budget is only half the work. The real challenge is sticking to it. The best way to do this is to track your expenses daily or weekly.
Ways to track spending:
- Use a notebook or Excel sheet.
- Use free mobile apps like Walnut, Money View, or ET Money.
- Check your bank SMS and UPI transactions regularly.
When you track spending, you can spot where money leaks happen and fix them quickly.
Step 9: Review and Adjust Every Month
Your budget is not fixed forever. Expenses and income change, so review your budget at the end of every month.
- Did you overspend anywhere?
- Did you meet your savings goal?
- Can you save more next month?
Example: If your electricity bill went higher in summer, adjust your budget by cutting down on eating out.
Step 10: Be Consistent and Patient
Budgeting is like building a habit. The first month may feel tough, but slowly it becomes part of your lifestyle. The key is discipline and consistency.
Over time, you’ll notice:
- Less financial stress
- More savings
- Better control over money
- Confidence in achieving goals like buying a house, starting a business, or taking vacations
Final Thoughts
Creating your first monthly budget may seem like a boring task, but it is actually the foundation of financial freedom. By following these steps, you will know exactly where your money is going and how you can make it work for you.
A budget is not about restricting your life, it’s about giving you freedom and peace of mind.
Start today, stick to it, and watch your financial life change for the better.
