How to Create Your First Monthly Budget: A Beginner’s Guide

written byAyush Gupta

updated onJune 14, 2025

Here’s why budgeting is essential:

• 81% of Indians run out of their salary before the month ends.
• Building a budget helps you allocate money to essentials, savings, and leisure while reducing financial stress.
• It prepares you for emergencies and long-term goals like education, home buying, or retirement.

Quick Steps to Create Your First Budget:

1. Track Your Income: List all sources like salary, freelance earnings, or interest.
2. Categorise Expenses: Divide into needs (rent, groceries) and wants (dining out, shopping).
3. Apply the 50/30/20 Rule:
   • 50% for needs (rent, utilities, food).
   • 30% for wants (entertainment, hobbies).
   • 20% for savings and debt repayment.
4. Use Tools: Apps like Walnut or Google Sheets to track spending.

Why It Matters:

• Helps reduce debt and save for emergencies.
• Prepares you for India-specific expenses like festivals, irregular incomes, and healthcare.
• Simplifies financial decisions and ensures consistent progress toward goals.

Budgeting isn’t about cutting back – it’s about gaining control. Start today to build a secure financial future.

How to Create a Monthly Budget for Beginners in India l महीने का बजट कैसे बनाएं?

Budget Basics You Need to Know

Budgeting is essentially a plan that maps out your monthly income and expenses, helping you take charge of your finances. Mastering the basics of budgeting is the first step toward creating a monthly plan that works for you.

What is a Budget?

At its core, a budget is a tool to monitor your income and expenses every month ^[1]. But it’s not just about keeping tabs on numbers – it’s about making informed decisions that shape your financial future.

“A budget is telling your money where to go, instead of wondering where it went.” – Dave Ramsay ^[2]

By managing your expenses, a budget gives you a clearer picture of your financial health ^[1]. It also helps you set aside money for both short-term goals and long-term investments ^[1].

One of the biggest advantages of budgeting is spotting and cutting down unnecessary spending. When you track your expenses, you can pinpoint areas where you’re overspending and make adjustments ^[1]. It’s a process that brings peace of mind – you’ll always know where your money is going and can plan ahead for upcoming costs ^[1].

Budgeting also simplifies financial decisions. Instead of guessing whether you can afford something, you’ll have concrete numbers to guide you. This is especially helpful in India, where festival seasons and family commitments can lead to sudden, unplanned expenses.

The 50/30/20 Rule Explained

The 50/30/20 rule is one of the simplest ways to start budgeting. It divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment^[3][4][5].

This method, introduced by Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan, is popular because it’s easy to follow. You won’t need complex tools or detailed spreadsheets to make it work ^[4].

“The 50/30/20 rule provides a simple yet effective method to manage personal finances. By balancing needs, lifestyle wants, and future security, it creates a sustainable approach to money management.” ^[4]

Here’s how the rule works:

• 50% for Needs: These are essential expenses like rent, utilities, groceries, transportation, insurance, and minimum debt payments. These are the unavoidable costs that directly impact your daily life.
• 30% for Wants: This category covers discretionary spending, such as dining out, entertainment, hobbies, and shopping for non-essential items. It allows you to enjoy your income without going overboard.
• 20% for Savings and Debt Repayment: This portion is for building your emergency fund, investing in options like mutual fund SIPs, paying off debts beyond the minimum, and contributing to retirement plans like PPF or NPS.

Let’s break this down with real-life examples from Indian households:

• Priya, an early-career professional in Bangalore, earns ₹50,000 per month after tax. She spends ₹25,000 (50%) on essentials like rent, groceries, and transport. ₹15,000 (30%) goes to wants like dining out and shopping, while ₹10,000 (20%) is set aside for savings and investments like mutual fund SIPs. By sharing rent, Priya keeps her housing costs manageable within the 50% limit ^[4].
• Rahul, a mid-career professional in Pune, earns ₹1,50,000 after tax. He allocates ₹75,000 (50%) to needs, ₹45,000 (30%) to wants, and ₹30,000 (20%) to savings and debt repayment.

The beauty of the 50/30/20 rule lies in its flexibility. You can tweak the categories without abandoning the system. For instance, if your rent goes up one month, you can temporarily cut back on discretionary spending. This adaptability makes it a practical approach for the long haul ^[4].

What makes this rule even more appealing is its balance – it allows you to save for the future while enjoying your money today ^[4]. Unlike rigid budgeting methods that strip away all fun, this one ensures you can maintain a comfortable lifestyle while securing your financial future.

To get started, calculate your monthly after-tax income. Spend a month tracking your expenses to understand where your money currently goes ^[3][4]. Once you have that data, categorise your spending and set limits for each category based on the 50/30/20 split ^[3].

With these budgeting basics in hand, you’re ready to design a monthly financial plan that fits your life and goals.

How to Create Your First Monthly Budget

Creating your first monthly budget is all about mapping out your income and expenses step by step.

List All Your Income Sources

A solid budget begins with knowing exactly how much money you bring in each month. This isn’t limited to your salary – it includes every source of income, no matter how small.

Make a list of all your income sources: salary, rental income, freelance earnings, interest from savings, or dividends. For example, if you earn ₹2,000 monthly from freelance graphic design or ₹1,500 as interest from a savings account, include these amounts. Even smaller earnings contribute to your overall financial picture.

Take Ananya, a software engineer in Mumbai, as an example. Her main salary after taxes was ₹75,000. But when she accounted for ₹3,000 from freelance web development and ₹800 in fixed deposit interest, her total monthly income turned out to be ₹78,800 – not just ₹75,000 as she originally thought ^[7].

For irregular income, calculate a six-month average to get a realistic estimate. Once you’ve got a clear picture of your earnings, you’re ready to tackle your expenses.

Sort Your Expenses into Categories

Now that you know your income, it’s time to figure out where your money is going. Understanding your spending habits is key to creating a budget that works for you.

Indian households often have unique spending patterns. On average, an Indian household spends just under ₹20,000 per month ^[6]. To organise your expenses, divide them into fixed costs (like rent, EMIs, and subscriptions) and variable costs (such as groceries, entertainment, and fuel).

Here are some common expense categories to track:

• Housing: Includes rent or home loan EMIs and maintenance charges. In cities, rent typically eats up about 7% of monthly spending ^[6].
• Food: Covers groceries, fruits, vegetables, and household essentials. Food often takes the largest chunk of the budget – around 40% in urban areas and nearly half in rural areas ^[6].
• Utilities: Electricity, mobile bills, internet, and cooking gas fall under this category.
• Transportation: Includes daily commutes, public transport passes, petrol, parking fees, and vehicle maintenance.
• Healthcare: Regular medical expenses, insurance premiums, and doctor visits. Medical costs account for about 6–7% of spending in both urban and rural areas ^[6].
• Education and Childcare: School fees, tuition classes, books, and daycare.
• Insurance: Premiums for health, life, and vehicle insurance.
• Investments and Savings: Contributions to mutual funds, PPF, or recurring deposits.
• Personal Care: Grooming, clothing, and salon visits.
• Entertainment: Dining out, streaming subscriptions, and social activities.
• Miscellaneous: Unexpected repairs, gifts, or emergency expenses.

To estimate variable expenses, review your bank statements and UPI transactions from the past three months.

This will give you a more accurate picture than relying on guesses.

For annual costs like insurance premiums or festival shopping, divide the total by 12 to spread it evenly across your monthly budget. For instance, if you spend ₹24,000 on Diwali shopping, set aside ₹2,000 each month.

Separate your expenses into “needs” and “wants.”

Needs are essentials like rent, groceries, and utilities, while wants are non-essentials like luxury dining or premium streaming services. This distinction is critical when applying budgeting rules.

Apply the 50/30/20 Rule to Your Money

The 50/30/20 rule is a simple yet effective way to structure your budget. It suggests allocating 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment ^[7].

Here’s how this works in practice:

• Ananya, with a monthly income of ₹75,000, allocates ₹37,500 for needs, ₹22,500 for wants, and ₹15,000 for savings or paying off debts ^[7].
• Rahul, an IT professional in Pune earning ₹1,50,000 per month, adjusts his budget to prioritise savings. He allocates ₹75,000 for needs, ₹30,000 for wants, and ₹45,000 for savings ^[4].

To apply this rule, calculate your target amounts by multiplying your income by 0.5, 0.3, and 0.2.

Compare these targets to your actual spending. If your needs exceed 50%, you might need to cut back on discretionary spending or explore ways to boost your income. For example, a premium gym membership could be reclassified as a “want” rather than a “need.”

Automate your savings by setting up direct transfers to your savings account, SIPs, or retirement funds as soon as your salary hits your account. This ensures you save first and spend later.

If you have high-interest debt, focus on paying it off quickly. However, if your debt is manageable, balance debt repayment with building savings to create a financial safety net ^[7]. The goal is to establish a system that’s both practical and sustainable, helping you improve your financial health over time while maintaining a comfortable lifestyle.

Budgeting Tools and Resources for Indians

Managing your finances doesn’t have to be overwhelming.

With the right tools, you can simplify the process and make budgeting a part of your daily routine. Whether you prefer apps, spreadsheets, or templates, there are plenty of options tailored for Indian users.

Apps, Spreadsheets, and Budget Templates

Mobile Apps for Indian Users

India-specific budgeting apps have become increasingly popular, offering features like expense tracking, bill reminders, and spending analysis. These apps cater to the unique needs of Indian households, such as handling multiple payment methods and supporting regional languages.

• Walnut: Automatically tracks expenses by reading transaction SMS alerts from your bank. This feature is particularly handy in India, where banks send detailed SMS notifications for every transaction.
• ET Money: Provides detailed reports to help you understand your spending habits.
• Cred: Perfect for credit card users, this app tracks expenses and rewards timely payments.
• Goodbudget: A digital take on the traditional envelope budgeting system, allowing you to allocate funds to various categories. The basic version is free for up to 20 envelopes, while premium options cost ₹830 per month or ₹6,640 annually.
• YNAB(You Need a Budget): Uses a zero-based budgeting system. According to CNBC Select, users save an average of ₹49,800 within two months and ₹4,98,000 in a year. The app costs ₹1,245 per month or ₹9,055 annually, with a 34-day free trial and a year of free access for college students.

When selecting an app, consider starting with a free trial or basic version to see if it meets your needs. Features like investment tracking or automatic bill reminders can also be useful.

Spreadsheets and Templates

If you like a hands-on approach, spreadsheets are a flexible and affordable way to manage your budget. Google Sheets is a great option for Indian users, as it supports rupee formatting and can be accessed from any internet-enabled device.

Budget templates can simplify the process. For example, Money Mattr offers a free downloadable planner you can customise. To get started, list all your income sources and monthly expenses, separating essentials from non-essentials. Spreadsheets also allow you to add categories like festival shopping, school fees, or investments, making them highly adaptable.

Microsoft Excel remains a favourite for many because of its familiarity and ease of use. Most people already have access to it, either through work or personal devices.

Track Expenses the Indian Way

Choosing the right tool is important, but tracking every transaction accurately is what truly matters.

Handling Mixed Payment Methods

Indian households often juggle cash, UPI payments, credit cards, and bank transfers. Many apps can sync digital transactions automatically, but cash expenses require manual entry. Make it a habit to record cash transactions daily to ensure nothing is missed.

Currency and Date Formatting

Look for tools that display amounts in ₹ and use the DD/MM/YYYY date format. This ensures accuracy and makes it easier to track expenses in a way that feels natural.

Some apps also include categories aligned with Indian spending habits, such as domestic help, school fees, festival costs, and medical bills. Many even support multiple Indian languages, making them accessible to a wider audience.

Security Considerations

When using apps, prioritise those with bank-level encryption. These apps sync transaction data securely without storing your passwords. Opt for tools that require only read-access to your accounts for added peace of mind.

Regular Tracking Habits

Consistency is the secret to effective budgeting. Dedicate 10–15 minutes each week to review and categorise your expenses. This helps you spot patterns and identify areas where you might be overspending. Whether you’re using an app or a spreadsheet, staying consistent is more important than the tool itself.

For families or couples, consider apps that allow multiple users to log expenses. This collaborative approach ensures all household spending – like groceries, utilities, and outings – is recorded accurately, making it easier to manage shared finances./banner/inline/?id=sbb-itb-98ad9c7

How to Track and Update Your Budget

Creating a budget is just the starting point – the real challenge lies in tracking your expenses consistently and making adjustments as life evolves. Without regular monitoring and updates, even the most well-planned budget can lose its effectiveness.

Record and Review Your Spending

Start Tracking Right Away

Don’t wait for the perfect app or system to get started. Use any simple method – whether it’s a notebook, a spreadsheet, or an app – and refine it over time. The key is to begin tracking your expenses immediately.

Build Daily and Weekly Habits

Consistency matters more than perfection when it comes to tracking. Spend 10–15 minutes each day logging your expenses, and set aside 20–30 minutes weekly for categorising and reviewing them. While apps can sync digital transactions from UPI, credit cards, or net banking, remember to manually track cash expenses. These small, regular efforts will help you spot spending patterns and stay on top of your finances.

Spot Spending Patterns

After a few weeks of tracking, you’ll likely notice trends in your spending. For example, weekend grocery trips might consistently exceed your budget, or those small, daily coffee runs could add up significantly. You may also spot seasonal trends – like higher spending during festival months such as October and November, when gifts, clothes, and celebrations are common.

Monthly Budget Check-Ins

At the end of each month, compare your actual spending with your budgeted amounts. Use this review to adjust your categories as needed.

“Checking in on your budget at least once a month gives you the chance to deal with fluctuations in a timely manner.” ^[8]

Update Your Budget When Things Change

Tracking your expenses is just the first step. The next is to adjust your budget whenever your income or expenses shift. A flexible budget ensures you stay in control of your finances.

Adjusting for Income Changes

Your budget should reflect your current financial situation. If your income increases due to a raise or bonus – or decreases for any reason – update your budget immediately. The 50/30/20 rule can serve as a helpful guide for reallocating funds.

Take Seema, a marketing professional in Delhi earning ₹55,000 monthly after taxes. When her housing costs increased, she adapted by sharing rent to manage her expenses. Similarly, Rahul, an IT professional in Pune with a ₹1,50,000 monthly income, reduced his discretionary spending from 30% to 20% to boost his long-term savings ^[4]. These examples show how budgets can be adjusted to match shifting priorities.

Managing Unexpected Costs

Life is full of surprises, and expenses like medical emergencies, home repairs, or family obligations can arise unexpectedly.

Instead of scrapping your entire budget, reallocate funds within your existing categories. If money is tight, consider temporarily cutting back on non-essential spending or finding ways to earn extra income. These quick adjustments can help you maintain financial stability.

Plan Regular Reviews

Schedule budget reviews at different intervals – monthly, quarterly, and annually. Monthly reviews help track your progress and make minor tweaks, while quarterly reviews allow you to measure progress toward larger financial goals. Annual reviews are ideal for setting new objectives and making major adjustments when life circumstances shift.

Stay Flexible

A good budget isn’t rigid – it adapts to life’s changes. If unexpected expenses force you to dip into your emergency fund, make replenishing it a priority. Cut back on discretionary spending or explore additional income sources to rebuild your safety net as quickly as possible. Flexibility is key to keeping your financial plan strong.

Practical Budgeting Tips for Indians

Budgeting in India comes with its own set of challenges and opportunities. From managing festival expenses to juggling cash and digital payments, Indian households require strategies tailored to their unique financial habits and lifestyle. Here are some practical tips that address these specific needs.

Budget for Festivals and Seasonal Spending

Festival seasons in India can be a financial whirlwind if not planned properly. Did you know that over 30% of annual consumer sales happen during festivals between August and January? For instance, Diwali alone generated a staggering ₹3.75 lakh crore in 2023, with retail sales growing by 62% during the season ^[10][11]. Here’s how you can prepare:

Set Up a Festival Fund

Save throughout the year for festivals. For example, if you typically spend ₹15,000 on Diwali, putting aside ₹1,250 every month in a dedicated festival fund ensures you won’t need to dip into your emergency savings.

Plan Your Festival Spending

Before any major festival, create a detailed budget. Cover all categories like gifts, sweets, decorations, clothing, and travel. For instance, if your Diwali budget is ₹20,000, you could allocate ₹8,000 for gifts, ₹5,000 for clothes, ₹4,000 for sweets and food, ₹2,000 for decorations, and ₹1,000 for miscellaneous expenses ^[9]. This way, your spending stays organised and focused.

Be a Smart Shopper

Festivals often come with attractive sales and discounts. Look out for deals during Navratri, Diwali, and similar celebrations ^[9]. Shopping at local markets or small businesses can also help you find better bargains ^[12]. To cut costs further, try making sweets at home or repurposing old decorations from previous years ^[12].

Handle Cash and Digital Payments

India’s payment landscape has transformed significantly. Back in 2016, nearly 90% of transactions were cash-based. By 2022, cash circulation dropped to just 20% ^[14]. However, many Indians still use both cash and digital payments, making it essential to manage both effectively.

Track Digital Payments Automatically

UPI has changed how Indians transact, processing an impressive 16.99 billion transactions worth ₹23.48 lakh crore in January 2025 alone ^[15]. Apps that sync with your bank account can automatically track UPI, credit card, and net banking transactions, saving you the hassle of manual entry.

Don’t Overlook Cash Expenses

While digital payments are convenient, cash transactions – like street food, local transport, or small purchases – can easily go untracked. Even though 86% of UPI transactions are for amounts under ₹500 ^[15], many daily expenses still rely on cash. Record these immediately, either in a notebook or on your phone.

Prioritise Digital Payments When Possible

Since UPI transactions are generally free ^[13], use them for regular expenses to leave a digital trail, making budgeting simpler. Reserve cash for situations where digital payments aren’t accepted or when you want to limit discretionary spending.

Keep Digital Transactions Secure

To protect your digital payments, enable multi-factor or biometric authentication for UPI transactions ^[15]. Regularly review your transaction history through banking apps or SMS alerts, and avoid using public Wi-Fi for payments to minimize risks ^[15].

Include Indian Saving Methods

While digital tools have simplified financial management, traditional saving methods still hold a strong place in Indian households. Combining these methods with modern tools can provide a well-rounded approach to saving.

Use Chit Funds Wisely

Chit funds are a mix of saving and borrowing ^[16]. If you’re considering one, allocate a fixed portion of your income. For instance, if you earn ₹50,000 a month, setting aside ₹5,000 for a chit fund could work as part of your savings plan. Choose only well-known, registered chit fund companies with a solid reputation. For example, Margadarsi Chit Fund manages assets worth ₹10,687 crore as of 2023 ^[16]. Always read the terms carefully and ensure timely payments.

Modern Alternatives to Physical Gold

Instead of buying physical gold, explore options like Gold Mutual Funds, Sovereign Gold Bonds (SGBs), or Gold ETFs ^[17]. These alternatives eliminate storage costs, guarantee purity, and offer exposure to gold prices, making them a practical addition to your investment portfolio.

Strike a Balance Between Old and New

Finding the right mix of traditional and modern methods is key. You could use recurring deposits for short-term goals, mutual funds for long-term wealth creation, and a small chit fund for community savings. Ensure all these methods fit within your overall budget, keeping your savings balanced and aligned with your financial goals.

Building Your Long-term Financial Plan

Think of your monthly budget not as the finish line, but as the starting point for financial security that lasts a lifetime. It’s the stepping stone to achieving major milestones like buying a home, funding education, or retiring comfortably. Once you’ve mastered your monthly budget, the next challenge is turning short-term financial discipline into a long-term strategy for building wealth.

Key Points for Budget Success

Shifting from a monthly budget to a long-term financial plan requires a thoughtful and structured approach. Start by setting SMART goals – specific, measurable, achievable, relevant, and time-bound. For instance, saving ₹5 lakh for college fees within four years is a clear and actionable target.

Take stock of your complete financial situation. This means going beyond your monthly income and expenses to include all sources of income, liabilities, assets, and current savings ^[18]. Having a full picture of your finances helps you understand where you stand and what steps to take next.

Make it a habit to review your budget every quarter. Adjust it to reflect any changes in income or shifting priorities. For example, Rahul from Pune, who earns ₹1.5 lakh a month, restructured his budget from the 50/30/20 rule to 50/20/30. By doing so, he increased his savings, allocating ₹25,000 to SIPs and ₹10,000 to retirement funds ^[4].

As your financial responsibilities grow, ensure you have an emergency fund in place and adequate insurance coverage ^[18].

For short-term goals (under three years), focus on preserving your capital. Fixed deposits or liquid funds are good options. For goals that are further away, consider investments with higher growth potential, such as equity mutual funds or stocks ^[4].

Your Next Steps for Financial Growth

Once your budget is working smoothly, it’s time to start thinking bigger. Diversify your investments to build a balanced portfolio. This can include stocks, bonds, mutual funds, gold, and real estate ^[18]. Thanks to digital platforms, investing has never been more accessible. In fact, investments in stocks and mutual funds via apps have surged by 50% over the past two years ^[19].

Plan ahead for rising education costs and estate management. Education inflation in India is climbing rapidly, so early planning is essential ^[18]. Similarly, as your wealth grows, estate planning – organising your assets to ensure they’re distributed according to your wishes – should become part of your long-term financial strategy ^[18].

Boost your financial knowledge by having open discussions about money with your family ^[18]. As your finances grow more complex, understanding the nuances of money management becomes even more critical.

Tools like Money Mattr’s budget planner can simplify the process. It evolves with your needs, transitioning from detailed monthly tracking to comprehensive financial planning. Features like automated investments and savings make it easier to stay on track.

Automating your financial growth is another smart move. Set up systematic investment plans (SIPs) or automatic transfers to goal-specific savings accounts. This ensures your financial goals stay on track, even during hectic times or market fluctuations ^[4].

FAQs

How can I manage my budget when my income varies each month?

If your income varies from month to month, the first step is to figure out your average monthly income from the past year. This gives you a solid starting point for planning your finances. Prioritise covering essential expenses like rent, groceries, utility bills, and loan EMIs. During months when your income is higher, make it a point to set aside extra money in a savings buffer – this will come in handy during months when earnings dip.

Keep a close watch on your spending and clearly distinguish between needs and wants. Cut back on discretionary expenses, such as dining out or entertainment, if your income for the month is lower. Budgeting tools like apps or even simple spreadsheets can help you track your finances and adjust your plan as needed. Over time, this method can help you maintain financial stability, even when your income fluctuates.

How can I manage my festival expenses without overspending?

Managing festival expenses can be a breeze with a bit of planning and thoughtful spending. Start by setting a clear budget for categories such as gifts, decorations, food, and travel. This way, you can focus on the essentials and steer clear of overspending on things you don’t really need.

Keep a close eye on your spending by tracking expenses throughout the festival. Jotting down every purchase can help you spot areas where you might be overshooting and make adjustments if needed. Planning ahead also works wonders – shop during sales, pre-order sweets, or reuse decorations from previous years to sidestep those last-minute price surges.

To celebrate without stretching your wallet, think about affordable alternatives like hosting potluck gatherings or crafting handmade gifts. These simple tweaks let you soak in the festive spirit without worrying about your finances.

How can I choose the best budgeting app or tool for managing my finances in India?

To find the right budgeting app or tool in India, consider these important factors:

• User-Friendly Design: Opt for an app that’s easy to use and navigate, making it stress-free to manage your finances.
• Key Features: Check for features like expense tracking, categorised budgets, and spending insights to keep your finances organised.
• Data Protection: Make sure the app takes your privacy seriously and uses strong security measures to safeguard your financial information.
• Personalisation Options: Select tools that allow you to customise categories and budgets to align with your specific financial goals.

Focusing on these aspects will help you choose a budgeting tool that meets your needs and supports effective money management tailored to the Indian scenario.

Ayush Gupta

Ayush Gupta is an entrepreneur and SEO consultant with over a decade of experience helping businesses grow. As the founder of Visibility Ventures, he combines technical expertise with practical financial knowledge to guide readers through credit cards, investments, and tax optimization. He holds certifications in Entrepreneurship and Business Laws from NUJS Kolkata and regularly advises companies on digital growth strategies.