Monthly Budget for Young Indians: 5 Proven Steps to Take Charge of Your Finances

Do you feel like your Money vanishes before the month ends? You’re not alone!

Creating a monthly budget can help. List your income and essential expenses and allocate funds for savings. This will allow you to take control and reduce financial stress.

Adjust and track your spending to improve your monthly budget and celebrate your progress! Remember, there’s a special surprise waiting at the end of this blog.

Let’s work towards better financial health!

Evaluating Your Income

The first step in effectively managing your finances is to determine your total monthly income. Let’s consider the example of Rahul, a recent college graduate who is 25 years old and has secured a job as a software engineer at a tech company in Bengaluru. If this individual earns ₹70,000 per month, this amount will serve as their baseline for financial planning.

Sources of Income

Income Source	Description	Example
Salary	Fixed monthly income from work	₹70,000 (Rahul’s salary)
Freelance Earnings	Additional income from projects	₹5,000 from design work
Bonuses	Extra earnings from performance	₹10,000 annually

Once you have identified your monthly income, you’ll want to break down your earnings to understand your financial situation better. This income might come from various sources, such as your salary, freelance work, or bonuses.

Understanding Your Expenses

In this step, it’s important to distinguish between Fixed and Variable Expenses to get a clearer picture of your financial obligations and create a more effective monthly budget.

What is Fixed Expense?

Fixed expenses are regular costs that remain constant each month, essential for Budgeting and financial stability.

Fixed Expenses Examples

Expense Type	Amount (₹)	Details
Rent	₹15,000	A monthly payment, such as ₹15,000 for rent minimum for tier 1 cities, that typically doesn’t change.
Utility Bills	₹1,200	Basic service fees, like a fixed electricity charge and water charges
Insurance Premiums	₹3,500	Monthly payments for policies, like Car or health insurance payments
Loan Payments	₹8,000	Fixed monthly repayments, EMI for personal or home loans

These expenses are examples that we take as reference for further in the blog.

What is Variable Expenses ?

Variable Expenses are costs that can change each month based on personal choices and circumstances. Some examples of common variable expenses are:-

Expense Type	Amount (₹)	Details
Groceries	₹2,500	Food and household essentials: this covers food and household essentials. Monthly amounts can fluctuate due to varying needs, special diets, or sales.
Dining Out	₹2,000	Meals at restaurants or cafes This covers the expenses for meals at restaurants, which can vary based on social outings or special occasions. Eating at home may reduce costs in certain months.
Entertainment	₹1,500	Movies, concerts, and streaming services This includes spending on movies, concerts, and streaming services. Costs can increase with more outings in a given month but decrease with fewer planned activities.

There are many examples, such as transportation, Health and Fitness, Clothing, and many more. Tracking variable expenses is essential for Budgeting.

After Evaluating the second step, we have one of the major steps in which you have to monitor your spending behavior.

Monitoring Your Spending Behavior

Track your expenses for a month using a budgeting app or a simple notebook. For instance:

• Rahul spent ₹10,000 dining out. By cooking at home, he could save a significant portion of this amount.
• Cancel inactive subscriptions (e.g., ₹1,500 for streaming services) to boost your savings.

This awareness is crucial for better financial management.

Setting Clear Financial Objectives

Set short-term and long-term goals to align your monthly budget with your dreams. For example:

• Short-Term Goal: Save ₹10,000 for a Goa vacation.
• Long-Term Goal: Save ₹5,00,000 for a car.

By tying your goals to personal values, such as travel or education, you stay motivated and focused.

Understanding Monthly Budgeting Basics

What is a Budget?

A monthly budget is your financial roadmap, guiding you in managing your income each month’s spending and saving.

Popular Budgeting Techniques to Consider

50/30/20 Principle

50/30/20 Principle This method divides your income into three categories:

Category	Percentage of Income	Details
Needs	50%	Essential expenses like housing and groceries. Housing, groceries, utilities
Wants	30%	Optional expenses such as dining out, leisure activities, and pursuing personal hobbies
Savings	20%	Financial goals and savings, investments, and debt Investments, debt repayment, emergency fund

Using this simple breakdown helps you see where your Money is going, making it easier to stay on top of your financial goals. Which budgeting method best fits your lifestyle? Let me know!

The 50/20/30 Rule is a simple budgeting method that helps you allocate your income into three categories.

Rohan’s Monthly Budget And Income

Let’s consider Rohan, who has a monthly income of ₹70,000. Here’s how he can apply the 50/20/30 principle:

Category	Amount (₹)	Details
Needs	₹35,000	Rent, groceries, utilities, transport
Wants	₹21,000	Dining out, entertainment, hobbies
Savings	₹14,000	Investments, emergency fund

By following the 50/20/30 Rule, Rohan can effectively manage his finances, ensuring he meets his essential needs, saves for the future, and enjoys his discretionary spending. This simple budgeting method is easy to understand and can be applied by anyone, regardless of age.

By following these guidelines, you can create a structured monthly budget that aids in achieving your financial goals!

Zero-Based Budgeting:

Zero-based Budgeting (ZBB) is a method in which every rupee of income is allocated to expenses, savings, or debt, ensuring that income minus expenses equals zero.

Here’s how Rohan’s ₹70,000 monthly income is distributed:

Category	Amount (₹)	Details
Housing	₹15,000	Rent or mortgage payments
Utilities	₹3,000	Electricity, water, and internet bills
Groceries	₹7,000	Monthly food and household essentials
Transportation	₹3,000	Fuel, public transport, or commute costs
Dining Out	₹5,000	Meals at restaurants or cafes
Entertainment	₹3,000	Movies, concerts, streaming subscriptions
Savings	₹20,000	Investments, emergency fund, or retirement savings
Debt Repayment	₹8,000	Loan EMIs or credit card repayments
Miscellaneous	₹6,000	Unexpected expenses or personal shopping
Total	₹70,000

Steps Rohan Follows for Zero-Based Budgeting

1. Calculate Total Income: Rohan’s monthly income is ₹70,000.
2. Categorize Expenses: Break down the income into housing, savings, entertainment, and other categories.
3. Allocate Every Rupee: Ensure all ₹70,000 is assigned to a specific purpose, leaving no untracked funds.
4. Monitor Expenses: Track spending throughout the month to stay within the allocated budget.
5. Review Monthly: Adjust allocations as needed for changes in income or expenses.

Benefits of Zero-Based Budgeting

• Complete Control: Every rupee is accounted for, ensuring no wasteful spending.
• Prioritized Savings: Encourages disciplined savings for future goals.
• Adaptability: Easily customizable for changing financial circumstances.

By following Zero-Based Budgeting, Rohan ensures that his money works efficiently, helping him achieve both short-term and long-term financial goals.

The main difference between zero-based Budgeting and the 50/30/20 Rule lies in their approach. ZBB requires meticulous tracking and justification of every rs spent, promoting a deeper understanding of your finances. The 50/30/20 Rule, on the other hand, offers a straightforward framework that can be easier to follow for those who prefer simplicity. Choosing the right method depends on your personal financial goals and comfort level with detailed Budgeting.

Navigating Monthly Budget Challenges and Issues with Overspending

If you notice that you’re overspending, keep track of your daily purchases to highlight areas where you could cut back. So here are some tips to Save Money Effectively

1. Set Clear Goals: Define what you’re saving for, whether it’s an emergency fund, a vacation, or a major purchase. This will help keep you motivated.

2. Create a Monthly Budget: Track your income and expenses to identify areas for savings. Stick to your monthly budget for tracking your overspending

3. Automate Savings: Set up automatic monthly transfers from your checking account to you savings account. Treat savings like a regular bill that you must pay.

4. Reduce Unnecessary Subscriptions: Review your recurring subscriptions and memberships. Cancel any that you don’t use or need, such as streaming services or gym memberships.

5. Plan Meals: Meal planning helps reduce food waste and cut down on impulsive purchases at the grocery store. Prepare a shopping list to track your overspending.

6. Shop with a List: Avoid impulse buying by creating a shopping list before you head out. This will help you to track your necessary purchases.

7. Cut Back on Dining Out: Reduce the number of times you eat out. Aim to cook more at home, which can significantly lower your monthly food expenses.

8. Buy Generic Brands: Generic or store-brand products are often just as good as name brands but are typically cheaper. Try switching to these options. By implementing these tips, you can effectively save Money while maintaining a balanced lifestyle!

Continue your learning journey with our other articles.

CONCLUSION

To help you start on your path to financial independence I have designed an editable Excel template that you can download [here]. This resource will help you manage your finances efficiently and make informed decisions.

Creating a solid monthly budget is crucial for enhancing your financial well-being. It enables you to take charge of your Money and work towards your goals while still enjoying life. By starting this process today, you set yourself up for a more secure and fulfilling future.

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