Plan your budget,
step by step

Start with the money that actually arrives

A budget begins with one number: the money that reaches your account each month. Use take-home pay, after tax and deductions such as provident fund, not your CTC or gross salary.

If your income varies, build the budget on a cautious figure, such as your lowest month in the past year, and treat anything above it as a bonus. Count other income only when it is regular, such as rent from a property. Leave out one-off money, like a bonus or a tax refund, until it lands.

Also note the dates money arrives and the dates bills leave. A budget can break in the middle of a month even when the totals work, simply because rent is due before salary lands.

Separate fixed costs from variable ones

Fixed costs are the same, or nearly the same, every month. Variable costs move with how you live. Knowing which is which shows you where you actually have room to change things.

EMIs deserve a second look because they are fixed costs that can run for years. Before you take on a new loan, check the monthly figure in the EMI Calculator and see what share of your take-home pay it would use. When money is tight, trim variable costs first and revisit fixed ones once a year.

Use the 50/30/20 guideline as a starting point

The 50/30/20 guideline divides take-home pay into three parts: about 50% for needs, 30% for wants and 20% for savings and extra debt repayment. It is a rule of thumb, not a rule. In an expensive city, needs may take more than half; on a higher income, you may be able to save well over 20%. Start here, then adjust until the numbers fit your life.

Move the savings on salary day, before you start spending. The Compound Interest Calculator shows how a lump sum grows at a fixed rate, and the SIP Calculator does the same for a monthly amount. Either way, the rate is an assumption, so test a cautious one.

Track what you spend

A budget only works when you compare it with what really happened. Your bank, UPI and card statements already hold most of the data, so tracking does not need a new habit, just a regular look.

1. 1Open last month's statements.
2. 2Tag each payment as a need, a want or a saving.
3. 3Total each group and compare it with your plan.
4. 4Set next month's limits from what you learned, not from what you hoped.

Look first for small, frequent payments, such as food delivery, app subscriptions and auto-renewals. They are easy to miss and they add up. A five-minute check once a week keeps the monthly review short and stops surprises from piling up.

Build a cushion, then review every month

A common guideline is an emergency fund of three to six months of essential expenses, kept somewhere easy to access. On the ₹30,000 of needs above, that is ₹90,000 to ₹1,80,000. If the full ₹12,000 of monthly savings went there, with no interest assumed, it would take 7.5 to 15 months to build.

The right size depends on how stable your income is and who depends on you, so treat the range as a guideline, not a target you must hit.

Then review once a month, on a fixed day such as just after salary arrives. Spend ten minutes comparing plan and actual. Ask which category overshot, and whether income or fixed costs changed. Adjust the plan rather than abandoning it.

Common budgeting mistakes

• Budgeting on gross pay or an expected bonus instead of take-home pay.
• Forgetting irregular costs. Divide yearly bills, such as insurance premiums, festivals and repairs, by 12 and set that amount aside every month.
• Setting limits so tight that you give up by the third week.
• Saving whatever is left at month-end, which is often nothing.
• Never reviewing, so the budget drifts out of date.