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6 Hacks to budget your income

Budgeting is a super critical part of your life. Everyday, one way or other budgeting comes into your life. Whether it be in the form of finance or your everyday decisions. You might not be having a budgeting plan as of now, but its high time you start budgeting things out. Let’s see 6 steps to attain a balanced budgeting plan for your career.

Step 1: Know your net income

The foundation for a solid budget is a solid income. But before that, you need to understand between your gross income and your net income. If your into freelancing, you need to understand your average monthly income and the amount of taxes you will be paying at the end of each month or year.

As freshers joining a company or starting as a freelancer, we think our CTC/gross salary is our take home salary. You need to understand, your current salary is subjected to taxes. To understand taxation in detail, check out the detailed Video series on taxation here. Focusing on your total income will lead you to overspend because you think you have more money than you currently have.

Step 2: Tracking your expenses/spending

Now, the next question is how you spend your money. Most importantly, how you track your spending. Categorizing your expenses will help you understand where your money is being spend the most and in which all areas.

The are two types of expenses. One is fixed, which goes on a monthly or daily basis like rent, loans, utilities, food, etc. The other is your variable expense such as groceries, petrol, entertainment, parties, trips, etc. No matter what, you will have to spend on your fixed expenses. But, you will have an opportunity to cut down your expenses on your variable expense. Suppose if your into parties, reducing your party to once a week will bring down your variable expense.

The question is how do we know where we spend. That is where bank statements come in. You can get your transaction statement easily from your bank login. Or you can use apps like money manger to track where your expenses are going.

If you want the old school technique, you can write down your daily expense on a book or paper to understand your daily cash flows. Even you can use spreadsheets and excel to note down in a detailed manner.

Step 3: Write down your goals

First things first, don't write you want to be financially free. This term is a cliché and I will tell you why in later articles. All right, the best thing to do is list down your short term and long terms goals. The goals you have for the next 1-2 years will fall under short term goals, like closing your credit card bill, setting up emergency fund, electronic gadget, vacation, etc.

Long term is a much longer and broader goals like your child's education, saving for your retirement, house/car to buy, etc. You may want to write it down in your diary so that you will mostly stick to this. Knowing that you have long term and short term goals set, you will start to cut down you expense sub consciously.

Step 4: Set up a plan of action

Now its the time to act. To understand the difference between your actually spending vs what you want to spend. Since you noted down your fixed and variable spending, you will need to compare this with your net income and priorities. Its best you limit your spending in specific categories, like “I will spend only 1000 this month on movies”.

There is a pure difference between the things you want and the things you need. Gasoline for your car for you to travel to work is a need, while Netflix subscription will count as a want. If you consciously start to differentiate the needs and want in your life, your financial goals will start to become realistic.


If you are confused on how to divide your income, its best to understand the 50-30-20 rule. This is a budgeting technique that divides your income into three categories by percentage. It lets you breakdown your income to put into different boxes and then spending money from these boxes.

Simply, it says, 50% of your income should go for your needs, 30% for your wants, and 20% for your savings. You can refer the below image to understand this better. You can download the image and keep in your mobile since it becomes handy at time, especially for salaried people.

Step 5: Staying on your budget

This might be difficult but since you have a documented detailed list of your fixed and variable expenses and you have fixed your budget, its time to adjust the way you spend your income. Start looking at your wants and ways to lower down your spending in this area. Can you skip a dinner night with your wife in favor of a dinner at home? Can you skip a party with friends once a month? or Wait for the price of that gadget you want to lower down? These are potential areas where you can actually reduce your spending to a higher extend.

The next is to find ways to reduce your fixed expense. Can you shop groceries during offers? or walk to the nearby store for your grocery shopping? Shop for budgeted furniture's and home appliances?

Remember, every penny saved is a penny earned, which adds up to your short term and long term goals. You will be surprised at the end of a month how much you will be saving by doing these minor adjustments on your expense.

Step 6: Reviewing your budget regularly

This is the single most toughest thing a person can do. We find shortcuts and are lazy at times. So, we possibly ignore this and keep going with our lives. But reviewing your budget on a regular basis will keep you on track with your spending. Make it a regular habit to check on your budget following the above steps. If your married, you can sit with your partner to review where all your spending and expenses went during that particular period or month.



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