Budgeting Basics: Income, Expenses & Savings
Welcome to your first step toward financial control! This lesson breaks down the three pillars of personal finance: understanding your Income, tracking your Expenses, and making Savings a non-negotiable priority.
Key Takeaways
- Your Net Income (In-hand salary) is the starting point for all budgeting.
- Expenses must be clearly categorized into Fixed (rent, EMIs) and Variable (groceries, entertainment).
- Follow the "Pay Yourself First" rule: Savings must be budgeted before spending.
- A good budget acts as a map to achieve goals like buying a house or funding education.
1. Understanding Your Income
Income is the money you receive regularly. For most salaried professionals in India, this means your Net Salary —the amount credited to your bank account after mandatory deductions like PF (Provident Fund) and Income Tax (TDS).
💡 Pro Tip
Always budget based on your **Net Income**, not your Gross Salary. Gross Salary includes money you never see in your bank account.
2. Categorizing and Tracking Your Expenses
Expenses are where your money goes. The key to successful budgeting is dividing them into **Fixed** and **Variable** categories.
| Category | Type | Est. Amount (₹) |
|---|---|---|
| Rent / Home EMI | Fixed | 15,000 |
| Health Insurance | Fixed | 1,500 |
| Groceries / Food | Variable | 8,000 |
| Fuel / Commute | Variable | 4,000 |
| Lifestyle / Fun | Variable | 3,500 |
3. Making Savings a Priority
The golden rule of personal finance is: Income - Savings = Expenses . Before you pay rent or buy groceries, allocate money to your future.
Even a small Systematic Investment Plan (SIP) of ₹1,000 or ₹2,000 is a great start. The goal is to make savings automatic.
Budgeting creates savings, savings create investments, and investments grow your future budget.
4. How to Start Today
- Calculate Net Income: Check your last 3 salary slips. Average the "in-hand" amount.
- Track Expenses: Use a notebook or app to record every ₹10 spent for 30 days.
- Automate Savings: Set up an auto-debit to a separate savings account or SIP for salary day.
Frequently Asked Questions
Should I include taxes and PF in my budget? ▼
No. Use only your **Net Income** (in-hand salary) because that is the money you actually control.
What percentage should I save? ▼
Aim for the **50/30/20 Rule**: 50% Needs, 30% Wants, and **20% Savings**. 20% is a great starting target.