A budget is simply a plan for your money. It does not have to be strict or complicated. A basic monthly budget shows where your income goes so you can pay your bills, save for the future and still enjoy life. This guide uses a simple method you can set up in about twenty minutes.
This is general information, not personal financial advice.
Step 1: Work out your monthly income
Add up the money you reliably receive each month after tax. If your income varies, use a low but realistic average, based on the last three to six months.
Step 2: List your fixed costs
These are the bills that stay roughly the same: rent or mortgage, utilities, phone, internet, insurance, loan repayments and transport passes. Check your bank statements to be sure you have them all.
Step 3: Track your flexible spending
Look at the last month or two of spending on food, eating out, shopping, entertainment and subscriptions. Many people are surprised by how much small purchases add up.
Step 4: Try the 50/30/20 rule
This popular guideline splits take-home pay into three parts:
- 50% for needs: housing, food, utilities, transport and minimum debt payments.
- 30% for wants: eating out, hobbies, travel, streaming and treats.
- 20% for savings and extra debt payments: emergency fund, retirement and paying loans down faster.
Example: on a monthly income of 2,000, that is 1,000 for needs, 600 for wants and 400 for savings and debt. It is a starting point. If rent is high where you live, your needs may be more than 50%, and that is fine as long as the plan works for you.
Step 5: Review it every month
Spend ten minutes at the end of each month comparing your plan with what actually happened. Adjust the numbers. A budget is a living document, not a one-time task.
Tips to make it stick
- Build a small emergency fund first, even a few hundred to begin with.
- Automate savings so money moves on payday before you can spend it.
- Cancel subscriptions you no longer use.
- Give yourself a small fun-money allowance so the budget feels realistic.
If you have loans, see how your payment is calculated in our EMI guide, and test your own figures with the EMI & Loan Calculator. To turn expenses into percentages, use the Percentage Calculator.
Frequently asked questions
How much should I save each month?
Many people aim for about 20% of take-home pay, but any regular amount is a good start.
Do I need an app?
No. A spreadsheet or a notebook works fine. Choose whatever you will actually use.
This guide is for general information only. See our disclaimer.