How to create a monthly budget in India

Creating a monthly budget is one of the most important steps you can take to gain control over your finances — especially in India, where expenses can range from rent and EMIs to daily chai and mobile recharges. Whether you’re a salaried employee, a freelancer, or a student, budgeting helps you save, spend wisely, and plan for the future.

In this article, we’ll walk you through how to create a monthly budget in India, step-by-step, tailored to real Indian households and income styles.

Step 1: Know Your Monthly Income (Post-Tax)

Before you start budgeting, you need to know how much money you have coming in.

Include:

Salary after tax (in-hand salary)
Freelance income
Rent from properties (if any)
Dividends or passive income
Side hustle earnings

Example: If your salary is ₹40,000/month and you earn ₹5,000 from part-time tuition, your total income is ₹45,000.

Step 2: Track Your Expenses for 1 Month

The next step is to understand where your money is going. Track your expenses for one month using:

Mobile apps (like Walnut, Money Manager, or ET Money)
Google Sheets or Excel
A physical notebook

Track categories like:

Rent/EMI
Groceries
Transportation (petrol, metro, Ola/Uber)
Utilities (electricity, water, mobile recharge)
Entertainment (Netflix, Swiggy, movies)
Subscriptions
Insurance

Step 3: Categorize Expenses as Fixed & Variable

Separate your expenses into two major types:

➤ Fixed Expenses (don’t change much monthly)

Rent
Loan EMIs
Insurance premiums
School fees

➤ Variable Expenses (can change month to month)

Groceries
Eating out
Shopping
Electricity
Travel

This helps in identifying what costs you can reduce during tight months.

Step 4: Follow the 50/30/20 Rule (Indian Version)

The classic budgeting rule can be adjusted for India:

50% – Needs (rent, groceries, utilities, school fees)
30% – Wants (eating out, online shopping, OTT subscriptions)
20% – Savings/Investments (SIPs, PPF, emergency fund)

If your income is ₹45,000:

Needs: ₹22,500
Wants: ₹13,500
Savings: ₹9,000

Step 5: Set Financial Goals

Goals make your budget more meaningful. Ask yourself:

Do I want to buy a bike?
Am I saving for marriage?
Do I want to invest in mutual funds?
Am I building an emergency fund?

Set SMART Goals:

Specific: “I want ₹50,000 for a vacation.”
Measurable: “Save ₹5,000/month.”
Achievable: Based on income.
Realistic: Don’t set impossible goals.
Time-bound: “By December 2025.”

Step 6: Choose a Budgeting Method

Here are some simple and India-friendly budgeting methods:

Envelope Method (Traditional)

Withdraw cash and keep it in labeled envelopes: rent, groceries, etc.

Digital Budgeting Apps

ET Money
Walnut
Moneyfy
Goodbudget (Envelope-style app)

Customize your own spreadsheet with income and expense categories.

Step 7: Automate Your Savings

The easiest way to save is to “pay yourself first.” Automate:

SIPs (Systematic Investment Plans)
Recurring deposits
PPF/NPS contributions

💸 If your savings go out first, you won’t be tempted to spend them.

Step 8: Review & Adjust Monthly

Budgeting is not a one-time task. At the end of each month:

✅ Review:

What you spent vs. what you planned
Did you overspend in one area?
Did you save as planned?

🛠️ Adjust:

Reduce unnecessary subscriptions
Allocate more to emergency funds if needed

Step 9: Prepare for Irregular Expenses

In India, some expenses are seasonal or annual:

Diwali gifts
School admissions
Car/bike insurance
LIC premium

Start a “sinking fund”—a separate saving for such future costs.

Step 10: Build an Emergency Fund

Every Indian household needs an emergency fund for:

Job loss
Medical emergencies
Sudden travel

Start with at least 3–6 months’ expenses in a liquid or savings account.

Bonus Tips for Budgeting in India:

Use UPI & track via SMS alerts.
Shop during sales, but don’t overspend.
Compare online vs offline before big purchases.
Cook at home to save thousands monthly.
Use credit cards wisely—pay full balance.

Final Thoughts

Creating a monthly budget in India is not about restricting yourself. It’s about knowing where every rupee goes, making smarter choices, and creating a financially secure future.

Stick with it for a few months, and it’ll become second nature. Remember, a budget is your financial mirror—it shows you the reality and helps you change it.