To make a monthly budget, start from your in-hand salary (not your CTC), list your fixed costs, set limits for everything else, move your savings out on payday, track what you actually spend and compare at month end. A simple starting rule is 50/30/20: 50% of take-home pay for needs, 30% for wants and 20% for savings. On a ₹50,000 in-hand salary that is ₹25,000 for needs, ₹15,000 for wants and ₹10,000 for savings.
What is the 50/30/20 rule?
The 50/30/20 rule was popularised by Elizabeth Warren and Amelia Warren Tyagi in their 2005 book All Your Worth. It splits your after-tax income into three buckets:
- Needs (50%): what you must pay to live and work: rent or home-loan EMI, groceries, electricity, phone and internet, transport, insurance, school fees and minimum loan repayments.
- Wants (30%): what you choose: eating out, shopping, OTT subscriptions, holidays, gadgets and most festival spending.
- Savings (20%): emergency fund, SIPs and other investments, and extra loan prepayments.
It is a starting point, not a law. The value is that it gives every rupee a job in three minutes, and you can adjust the split once you see your real numbers.
Worked example: ₹50,000 in-hand salary
| Bucket | Item | Monthly ₹ |
|---|---|---|
| Needs · ₹25,000 | Rent (shared flat) ₹14,000 · Groceries ₹5,500 · Electricity, phone & internet ₹2,000 · Transport ₹2,000 · Health insurance top-up ₹1,500 | ₹25,000 |
| Wants · ₹15,000 | Eating out & ordering in ₹4,000 · Shopping ₹4,000 · Subscriptions ₹1,000 · Outings & travel ₹3,000 · Gifts & festivals ₹3,000 | ₹15,000 |
| Savings · ₹10,000 | SIP ₹5,000 · Emergency fund ₹3,000 · Sinking funds ₹2,000 | ₹10,000 |
| Total | ₹50,000 | |
The amounts are an illustration. Your own list will differ, but the method is the same.
The metro version: 60/20/20
In Mumbai, Bengaluru, Delhi NCR or Pune, rent alone can take 30–40% of a starting salary, so needs rarely fit in 50%. A common fix is 60/20/20: allow 60% for needs, cut wants to 20% and protect the 20% savings. If even that doesn't fit, trim wants further before you cut savings.
How to make a monthly budget in 6 steps
- Write down your in-hand income. Use the amount that actually reaches your bank account after PF, tax (TDS) and other deductions. Our guide to CTC vs in-hand salary shows why these differ.
- List fixed expenses: rent or EMI, school fees, insurance, SIPs, subscriptions and utility bills. These are roughly the same every month.
- Set limits for variable expenses: groceries, fuel, eating out, shopping, health, personal care, and gifts and festivals.
- Pay yourself first. On salary day, move the savings amount to a separate account or let the SIP auto-debit. What's left is what you can spend.
- Track every expense. Note each spend with its date, category and payment method (UPI, card or cash). UPI makes small spends easy to forget, so jot them daily.
- Review at month end. Compare planned against actual, see which category overshot, and adjust next month's plan.
Budget categories to copy
| Fixed expenses | Variable expenses |
|---|---|
| Rent / EMI | Groceries |
| Electricity | Fuel / transport |
| Phone & internet | Eating out |
| Insurance | Shopping |
| School fees | Health |
| Subscriptions | Gifts & festivals |
| SIP / investments | Personal care |
Don't forget the expenses that don't come every month
Annual insurance premiums, school term fees, Diwali shopping and wedding-season gifts are why budgets that look fine on paper break in October. Divide each one by the months left and save that amount every month, a method called sinking funds. See our sinking funds guide for a ready list.
How much emergency fund should you keep?
A common rule of thumb is 3 to 6 months of essential expenses, kept somewhere you can reach quickly, such as a savings account or a sweep-in FD. On the example above, essentials are about ₹25,000 a month, so the target is ₹75,000 to ₹1,50,000. Build it before you take on bigger investment goals.
Printable planners that do the maths with you
The Monthly Budget Planner (₹) has an annual overview, a financial-goals page with an emergency-fund target, 12 monthly budget pages with the exact fixed and variable categories above, and expense-tracker pages. A4, undated, ₹399. Paid twice a month or on irregular dates? The Paycheck Budget planner plans each salary separately. Keep due dates in one place with the Bill Tracker (₹149). See all budget & finance planners.
Frequently asked questions
What is the 50/30/20 rule for a ₹50,000 salary?
On ₹50,000 in-hand, the 50/30/20 rule gives ₹25,000 for needs, ₹15,000 for wants and ₹10,000 for savings each month.
Should I use CTC or in-hand salary for my budget?
Always use in-hand salary, the amount that reaches your bank account after PF, tax and other deductions. CTC includes money you never receive monthly.
Does the 50/30/20 rule work in Indian metro cities?
Often not as-is, because rent is high. Many people use 60/20/20 instead: 60% needs, 20% wants and 20% savings, protecting the savings share.
How much emergency fund should I have in India?
A common rule of thumb is 3 to 6 months of essential expenses, kept in a savings account or sweep-in FD you can access quickly.
What is the easiest way to track expenses?
Write each spend with its date, category and payment method on the day you make it, then total the categories at month end. UPI spends are the easiest to forget, so note them daily.
This article is general information, not financial advice. For decisions about investments or loans, speak to a SEBI-registered adviser.