How to make a monthly budget in India: a step-by-step guide with a ₹60,000 example

“How to make a budget” is a simpler question than most templates make it look. You don’t need a guru’s percentages or a twelve-tab spreadsheet. You need one honest month of numbers, a way to sort them, and ten minutes a week to look at them again.

Here it is in five steps, written for how money moves in an Indian household: a salary that arrives after TDS and PF, rent or an EMI, dozens of small UPI payments, and big once-a-year costs like Diwali, school fees and insurance premiums.

Step 1: Track one real month (UPI included)

Start with take-home pay, the amount that lands in your account after deductions, not your CTC. If your income varies, use your lowest month of the last six. A budget built on your best month fails in an ordinary one.

Then collect one full month of actual spending. Memory is good at rent and bad at the twenty small payments for chai, autos and vegetables, so pull from three places:

• Your bank statement. UPI moves money between bank accounts, so the statement catches payments from every UPI app that pays from that account: Google Pay, PhonePe, Paytm or your bank’s own app. EMIs and ATM withdrawals show up here too. The exception is UPI Lite: the statement shows only the top-up, so check your UPI app’s history for those small payments.
• Your credit card statement. This includes a RuPay credit card linked to UPI, a facility RBI announced in June 2022. Those payments land on the card bill, not the bank statement.
• Cash. An ATM withdrawal is one line. Jot down roughly where the cash went.

Count a card spend when you make it, then ignore the bill payment from your bank, because it’s the same money. A friend paying back their half of dinner isn’t income. If you’d rather an app did the tracking, our UPI expense tracker guide has five quick tests for whether an app handles UPI properly.

Step 2: Sort fixed costs from variable costs

Give every line two labels.

Fixed or variable. Fixed costs stay the same each month: rent, EMIs, premiums, mobile and broadband, subscriptions, school fees. Variable costs move, and you decide them: groceries, eating out, delivery, fuel, cabs, shopping.

Need or want. A need is something you’d pay even in a bad month, including minimum loan payments and money you’ve promised your parents. A want is a choice: eating out, OTT, new clothes, trips.

Fixed costs set your floor. Variable wants are where a budget actually moves. If you need ₹5,000 back next month, that’s almost always where it comes from. Keep categories to about ten, or the sorting becomes the chore you stop doing.

Step 3: Pick a method

50/30/20, adapted for Indian incomes

The 50/30/20 rule splits take-home pay into 50% needs, 30% wants and 20% savings, including loan repayment above the minimum. Four adjustments make it fit an Indian salary:

• High rent breaks the 50. If needs pass half, take the difference out of wants first. If you can’t hold 20% savings, set a floor (say 10%) and raise it with every increment.
• Family support is a need. Money you send home every month gets its own line under needs.
• EMIs are needs; prepayments are savings. The minimum EMI sits in the 50. Anything you pay early counts towards the 20.
• Irregular income needs a floor. Run the split on your lowest recent month and send good-month extras to your buffers.

The envelope method, without the envelopes

The classic envelope method puts each category’s cash in its own envelope, and you spend only from that envelope. When it’s empty, you stop. With most spending on UPI, two digital versions work better:

• A spending account. On salary day, move the month’s variable budget into a second bank account and make it the one your UPI app pays from (UPI apps can link more than one account). A low balance is the envelope emptying.
• Category caps. Cap the two or three categories that leak most, usually delivery, shopping and cabs, and check them weekly.

Use 50/30/20 for the whole budget and envelopes for the leaky categories. If you’d rather give every rupee a job before the month starts, that’s zero-based budgeting; our best budgeting app guide explains how the four budgeting philosophies differ.

Step 4: Build the buffers

Emergency fund first

The National Centre for Financial Education (NCFE), promoted by RBI, SEBI, IRDAI and PFRDA, suggests keeping three to six months of living expenses in an emergency fund. Measure it against your needs, and let it take the first claim on your 20% until it’s built.

Keep it somewhere you can reach within a day that won’t swing in value, such as a separate savings account or a fixed deposit you can break early. Bank deposits are insured by DICGC up to ₹5 lakh per depositor per bank, principal and interest together. An emergency fund isn’t a substitute for insurance, either; NCFE lists adequate health, life and property insurance as a separate tip.

Sinking funds for the costs you can see coming

A sinking fund is money you set aside monthly for a cost you already know about: festival gifts, clothes and travel home; yearly health or motor premiums; school fees and books; family weddings; vehicle servicing; a phone or laptop replacement.

Look up what each cost last year, divide by 12, and move that amount every month into a separate account or savings goal. ₹36,000 of festival spending becomes ₹3,000 a month. When Diwali comes, the money is already there. An emergency fund is for what you can’t predict. Sinking funds are for what you can.

Step 5: Set a review cadence

1. Weekly, ten minutes. Log anything missing, check the leaky categories against their caps, and slow down if a cap is close.
2. Monthly, on salary day. Compare plan against actual, move any surplus to a buffer or goal, and adjust next month’s numbers to what really happened.
3. Yearly, or at every increment. Redo Step 1, raise your savings rate, and update sinking funds for new premiums and fees. Decide where a raise goes before it quietly becomes lifestyle.

Expect the first month to be off. That’s what month one is for.

Worked example: a ₹60,000 take-home budget

One person renting in a city, with a two-wheeler EMI and ₹60,000 take-home pay, split 50/30/20. The numbers are illustrative; use your own Step 1 month.

Line	Bucket	₹ per month
Rent	Need	14,000
Groceries and milk	Need	6,000
Bills (power, water, gas, mobile, broadband) and commute	Need	5,500
Two-wheeler EMI	Need	3,000
Health-premium sinking fund (₹18,000 a year ÷ 12)	Need	1,500
Needs (50%)		30,000
Eating out and food delivery	Want	4,500
Shopping and weekend trips	Want	7,500
Festival sinking fund (₹36,000 a year ÷ 12)	Want	3,000
Subscriptions and a buffer for the unplanned	Want	3,000
Wants (30%)		18,000
Emergency fund	Savings	7,000
Long-term investing	Savings	5,000
Savings (20%)		12,000

What to read off it:

• Emergency target: ₹90,000 to ₹1,80,000, three to six months of the ₹30,000 needs. At ₹7,000 a month, the three-month mark takes about 13 months. After that, the ₹7,000 can move to other goals.
• If rent were ₹22,000, needs would be ₹38,000, about 63% of take-home. Keep savings at ₹12,000 and cut wants to ₹10,000. A 63/17/20 split is fine; protecting the savings line is the point.
• Eating out, shopping and trips (₹12,000) are the steering wheel. When a month runs hot, correct here, not in the EMI or the emergency fund.

Where mFinley fits

All of this works on paper or in a spreadsheet. If you want an app, mFinley is a privacy-first expense tracker: enter transactions by hand, import a CSV, or snap or paste a statement and let optional AI pull out the entries. There’s no bank login, and your data stays on your device.

Budgets, savings goals and net worth sit in one workspace, so your emergency fund and sinking funds can each be a goal (the free plan includes up to three). The free core has no ads and no data sale. PLUS adds recurring-expense detection, anomaly alerts and optional AI on your own key, so your data goes to your AI provider, never through our servers. It runs on the web and Android, and everything exports to CSV or Excel. For the wider privacy trade-offs, see our guide to expense trackers that don’t connect to your bank.

The bottom line

A budget isn’t a sheet you fill in once. It’s a plan you check. Track one real month, sort it two ways, split it, fund the buffers, and give it ten minutes every Sunday. The best budget is the one you’re still checking in month six.