“A budget is telling your money where to go instead of wondering where it went.” – John C. Maxwell
Introduction
Starting a budget for the first time can seem like a daunting task, but it doesn’t have to be. Knowing how to start budgeting for the first time is an essential skill that empowers you to take control of your finances. In this guide, we’ll show you step-by-step how to set up your first budget in a way that’s simple, sustainable, and tailored to your financial goals.
1. Understand Your Income
The first step in budgeting is knowing how much money is coming in. This could include your salary, side hustle earnings, freelance work, or passive income.
Quick Tip:
Keep a record of all your income sources—both regular and irregular.
📊 Example:
Your monthly salary + any freelance work = total monthly income.
2. List All Your Expenses
Now that you know how much you earn, it’s time to track where your money goes. Write down every monthly expense, big or small.
- Fixed Expenses (Rent, EMI, utilities, etc.)
- Variable Expenses (Food, entertainment, etc.)
- Discretionary Expenses (Shopping, dining out)
Bonus Tip:
Use expense tracker apps like Spendee or Wally to monitor these in real time.
3. Categorize Your Expenses
Once you’ve listed your expenses, break them into categories. This will help you understand where your money is going and where you can cut back.
Example:
- Essentials: Rent, groceries, utilities
- Non-Essentials: Dining out, entertainment, subscriptions
💡 Tip: Track all your spending for a month to get an accurate picture.
4. Set Your Budgeting Goals
What are you trying to achieve? Whether it’s saving for an emergency fund, getting out of debt, or saving for a vacation, set clear and realistic goals.
SMART Goals Example:
- Save ₹10,000 per month for the next 6 months for an emergency fund.
- Cut down dining-out expenses by 20% in the next month.
🎯 Tip: Having a clear goal makes budgeting feel like a mission rather than a chore.
5. Choose a Budgeting Method
There are several methods to budget. Choose the one that suits your style:
- Zero-Based Budgeting: Every rupee is assigned to a category.
- 50/30/20 Rule: 50% needs, 30% wants, and 20% savings.
- Envelope System: Use cash for each category, and once it’s gone, that’s it for the month.
💡 Tip: You don’t have to stick to one method forever—feel free to experiment.
6. Build an Emergency Fund
Before diving into long-term savings or investing, ensure you have at least ₹50,000–₹1,00,000 in an emergency fund.
Why it matters:
Emergencies happen—whether it’s medical expenses, car repairs, or losing your job. Having a buffer will prevent you from falling into debt.
💰 Tip: Aim for 3–6 months’ worth of expenses.
7. Automate Your Savings
Once your income comes in, set up automatic transfers to your savings and investment accounts. This eliminates the temptation to spend the money before you save it.
🔒 Tip: Automating helps you stay consistent and removes human error.
8. Review and Adjust Your Budget Monthly
Your first budget won’t be perfect—and that’s okay. Every month, review your budget and adjust it as needed. Life changes, and so should your budget.
Quick Tip:
If you overspend in one category, make up for it by cutting back in another.
✅ Final Word
Starting a budget doesn’t have to be difficult, but it does require some commitment. Start small, keep your goals clear, and adjust as you go. Budgeting for the first time is a huge step towards taking control of your finances and setting yourself up for a secure future.
📌Sources
- Mint: Personal budgeting tips
- NerdWallet: Budgeting 101 for beginners
- Broke Millennial: Budgeting tools for young professionals
- User interviews from Reddit India Finance
