in

Monthly Budget for Middle Class Family in India

Most of the Indian Household don’t follow or even have a strict monthly budget. And the need for one is realised at the end of the month when the balance between income and expenses starts to tilt. And the cycle repeats itself each month. So in this article, we are going to see how easy it is to make a monthly budget. We are also going to see few examples of the monthly budget for middle class family in India.

A monthly expense list, be it your personal or for the family, not only helps you in keeping track of the outflow of your money, but it also helps you in making realistic duration for your financial goals and reaching it.

You would have no idea when will you be able to buy the new Airpods unless you have a fixed monthly expenditure list and you are following it to the penny. Then only you can save up enough to fuel your “wants”.

Why is the Monthly Budget so Important?

A monthly budget tracks your income and expenses, and it will let you know whether you are overspending or not. A monthly budget is like a guard rail on a hilly road. It protects your financial well being from jumping off a cliff.

Let us understand with an example – how a monthly budget protects your financial health from getting derailed.

If you are earning a monthly income of Eighty Thousand Rupees, and you are paying Forty to Fifty Thousand Rupees in either house rent or home loan EMI, then a monthly budget will tell you visually that you are becoming house poor.

If you are spending more than 10% to 15% of your monthly income on unnecessary online spending, then a monthly budget will visually remind you to cut back on those expenses.

A monthly budget can also help you fulfil your dreams.

Let us see an example –

Everyone should have a separate Saving Account focused on saving for their “wants”. Like saving towards the next smartphone or a new sound system or a brand new sofa for the living room, etc.

This saving account doesn’t have to be with a brick and mortar bank. There are numerous online banking services available in India, like the Kotak 811 Savings Account or the Indusind Bank Savings Account or the Federal Bank 24 7 Saving Account or a small finance bank like Equitas Bank, where you can open a Saving Account with zero balance.

And these kinds of online saving accounts generally pay a higher saving interest compared to regular saving accounts. The account opening process is totally online, so you do not even have to visit a branch to open one of these accounts.

Each month you put some specific amount in this account, and you break it when you need to buy stuff that you want.

But if you don’t have a monthly budget, then you don’t even know how much money is going out at the end of the month. So most of the time, saving for your future remains ZERO. Let alone saving for your short term wants.

And a monthly budget visually shows you how much money is left at the end of the month. So you can adjust your spending accordingly.

“Don’t save what is left after spending; spend what is left after saving.”

Most of us pull our hair over taxes during the last 3 months of a financial year, that is, January, February and March. But if you maintain a simple monthly budget, then tax calculation becomes super easy.

With a Monthly Budget, you get a visual representation of how much EMI you are paying for a home loan, how much money is getting invested in Insurances, ELSS, PPF, etc. And it will also tell you how much you need to save to enjoy the full benefit of 80C.

We can list out so many cases where a Monthly Budget can save you a lot of headaches. So, we suggest you start maintaining a monthly expenditure list right from today.

Should You Use a Smartphone App or Pen & Paper to Track Your Monthly Budget?

Many smartphone apps are available nowadays that will track each of your expenses and income. You just need to provide few details. And if all of your transactions are digital in nature, then you don’t even need to manually enter the transaction details. The app will make a nice income and expenditure report for you.

But a monthly income and expenditure list or a monthly budget written with your own hand on a hard copy will make you think hard about all the expenses you are making. Just like hard cash trigger the pain sensors in your brain, whereas plastic cards don’t.

And in the process, it will motivate you to slash those unnecessary expenses which provide very little to no value to your life.

Most of the time, if you are using an app to maintain your monthly budget then all you are doing is organizing your income and expense and never looking or analyzing it.

So we suggest you use a Pen and Paper to write down how much you are earning in a month and where the money is going throughout the month. At most, it will take you an hour, but you will save thousands of Rupees in the end.

And as the saying goes, – “A Penny Saved is a Penny Earned”!

When you sit down to calculate how much you spend on food, and you see that the “Swiggy’s” and the “Zomato’s” are taking away 5,000 to 6,000 Rupees per month, it will hit home hard. But if you are using a smartphone app to calculate all this, most of the time, you will not see this kind of in-depth calculations.

So Pen and Paper is the best way to calculate your monthly budget.

How to Make Yourself Strictly Follow a Monthly Budget?

For some people following a monthly budget comes easy, and for some people, it is as hard as waking up at 5:30 in the morning.

Following a monthly budget or any self-created restriction for that matter should come from within yourself. No one can force you until or unless you do it yourself.

One of the tried and tested method of making yourself follow a monthly budget is to reward yourself 5% to 10% of the money you saved by following the budget.

For example –

If, at the end of the month, you saved Rs. 5,000/- by strictly following a monthly budget, then spoil yourself with 250 – 500 Rupees. As if it is free money and you can spend it however you like.

Using this money, you can taste the new item on the menu of your favourite restaurant or donate it to the charity of your choice. It is up to you, how you want to spend it.

But do not make it a habit. You need to give up that luxury once you are habituated with following a budget.

How to Categorize Your Monthly Expenses?

Categorization of your expenses is a very important part of budgeting. Certain Expense Category will have more priority than others. For example, your transportation expenses should have less priority than your food and lodging expenses.

You need to categorize each expense and list it according to its priority.

It might seem an unnecessary, tedious step, but this will greatly assist you to save more money.

There is a 1974 Bollywood movie named “Roti, Kapada Aur Makaan“. It basically means Food, Clothes and Shelter. The three most important necessities of life. Similarly, your expenses on those three items should take the highest priority.

Here is how you should categorize your expenses.

In the High Priority Category, jot down every expense that you cannot curb. Like children’s school and tuition fees, Apartment maintenance bill, etc., and the three obvious mentioned above. These are the expenses that you cannot cutaway.

Next comes the Medium Priority Category. Here, you will write down all the expenses you cannot control now, but you can definitely cut these expenses down in the future with a little bit of lifestyle tweaking.

For example –

Transportation – If you are using your personal vehicle for your regular commute, you can definitely curb those petrol expenses using public transport. Not to mention the amount of CO2 and other harmful gases you are releasing into the atmosphere by using a single car for a single person.

And using public transport, you will bring down your transportation expenses in half.

Energy Bill – You can save a lot of electricity by turning off all the appliance that consumes electricity when you go out for a morning walk or any outdoor activity.

Turning off your refrigerator daily for 2 hours might not destroy the perishable present in the refrigerator, but it might bring a massive reduction in the electricity bill.

As we said, the expenses in the Medium Priority Category are unavoidable at present, but you must move towards curbing some of them or part of them. And these kinds of cost-cutting can drastically contribute to your saving account.

As the proverb goes, “Little drops of water make the mighty ocean“.

The Low Priority Category will be the last one. Here, you will write down all the expenses which you can easily cut, starting from today.

All your “Leisure and Luxury” expenses go into this category. Movie ticket expenses, restaurant expense, etc., goes in this category.

These expenses are easily restrainable only if you want to. And you should want to stop these “unnecessary” expense if you want to see a big fat saving balance.

Stopping these kinds of expenses doesn’t mean that you will not enter a restaurant ever again. If you were eating out every weekend, before, then just visit it once a month. If you were ordering from a restaurant five times a month, then do it once or twice a month.

At the end of the day, it is all about stopping the flow of money from your pocket to others and keeping the most of it to yourself. So, the motivation for the hard work should come from within.

And as Mr Ramsey said –

Being wealthy is not about buying things but being able to buy things.

And that too, out right cash!

How To Make a Monthly Budget for an Indian Family?

Any budget has 2 major sections, Cash Inflow and Cash Outflow. Otherwise known as Income and Expenses.

In the Income section, you will write down all source of money coming into your pocket at the end of the month, along with the value. Be it your monthly salary, dividend from Stocks or Mutual Funds, rental income, etc.

In the Expense section, you write down all the expenses that are going to occur in the coming month. Basically, you will jot down the ways money is going to flow out of your pocket.

The money that you are allocating for your savings, investments, insurances should also go into the Expense section.

The Expense section is where you need to focus the most. The Expense section is going to show you visually where your money is going and what kind of tweaking is needed so you can save the most amount of cash at the end of the month.

Example of Monthly Budget for an Indian Family of 4 Members – [Example 1]

Now let us see how does a Monthly Budget of an Indian Family with 4 members look like.

We are going to assume that the family consists of 4 people, of which 2 are Earning Adults and 2 are Children. And the family is living in Mumbai.

Why specify the location?

Because, cost of living and salary varies from location to location.

Income Section

We will write down every income that is generated each month. Any one-time income, for example, profits from selling stocks, mutual funds, real estate, or one-time annual bonus, or maturing of fixed deposits, etc., are not included here.

  1. Monthly Salary – According to Payscale, a person working in Mumbai makes Rs. 5,35,000/- per year on an average basis. That is (5,35,000 / 12) = Rs. 44,583/- per month.
    We are going to round that up to Rs. 45,000/-.

    As there are 2 working adults in the family, the total income generated from salary will be (45,000 x 2) = Rs. 90,000/- at the end of the month.
  2. Income from Fixed Income Instruments – Here, we will write any income that is generated from any Fixed Income Instruments like Monthly Income FD, Monthly Dividend from Mutual Funds, Income from Senior Citizen Savings Scheme or SCSS, etc.

    In a family of four where 2 members are children, it is not ideal to create income from Fixed Income Instruments. It is better to let those returns compound year over year at this point.
    So ZERO Rupees is coming from Fixed Income Instruments.
  3. Other Incomes – Here, we will write down any other income that is generated every month. It can be Rental Income, Extra Work Hours Income, Income from Freelancing, etc.
    Let us assume Rs. 20,000/- is generated in the form of Other Incomes.

In the end, the Total Monthly Income stands at Rs. 1,10,000/-.

Expense Section

This is the most important section you need to concentrate on.

Here, we will write down all the expenses according to the priority classifications discussed above.

According to Warren Buffet, as quoted earlier, we need to save first then spend the rest. So before planning any expenses, we should save at least 10% of the monthly income. More is better.

  1. Savings 10% of the Total Monthly Income comes out as Rs. 11,000/-.
    We can round that down to 10,000/- Rupees, but if you can afford to save 10% of your earning, then please do. Your future self will bless you for that.

    But before you start saving in any kind of Mutual Fund, PPF, Bond, Equity, etc., it is very important to have an Emergency Fund.

    If you have no idea about Emergency Fund and you are hearing the term “Emergency Fund” for the first time in your life, then we have an in-depth article about Emergency Fund.
    In that article, we talked about every aspect of an Emergency Fund, starting from the definition to how you can make one for yourself. So please do give it a read.

    Once you have a fully funded Emergency Fund, then you can start investing in Stocks, Mutual Funds, Bonds, PPF, etc.

    After saving Rs. 10,000/- we are left with 1 Lakh Rupees for the month.
  2. High Priority Expenses
    A) Monthly Ration – Rs. 5,000/-

    B) House Rent – Rs. 40,000/- (Including Maintenance)

    C) Children’s School Fees and Tuition – Rs. 12,000/- Per Month

    D) Life Insurance – Rs. 2,000/- Per Month

    E) Medical Insurances for a single person – Rs. 500/- to Rs. 800/- Per Month
    Medical Insurance for the whole family (Husband, Wife and 2 Children) – Rs. 1,200/- to Rs. 1,400/- Per Month
  3. Medium Priority Expenses
    A) Utility Bills (Electricity, Cooking Gas, Water, Garbage Disposal, etc.) – Rs. 5,000/-

    B) Broadband Internet and Cable TV Bills – Rs. 1,500/-

    C) Monthly Mobile Recharge – Rs. 500/-

    D) Transportation –
    If using Public Transport – Rs. 5,000/- to 6,000/- Per Month
    If using Private Car – Rs. 10,000/- to Rs. 12,000/- Per Month (Considering the price of Petrol is Rs. 100/- and each day 3 to 4 Litres of Petrol is consumed)

    E) Household Help (Maid, Cook, etc.) – Rs. 8,000/- to Rs. 10,000/- Per Month
  4. Low Priority Expenses
    A) Going To a Movie Theatre Once a Month – Rs. 1,500/- to Rs. 2,000/-

    B) Family Dinner in a Decent Restaurant – Rs. 3,000/- to Rs. 5000/- Per Night

    C) Mini Vacation and Miscellaneous – Rs. 4,000/- to Rs. 5,000/- Per Day

The High and Medium Priority Expenses will take a massive chunk out of your monthly income. Nearly 75% to 90%.

In the above monthly budget, High Priority and Medium Priority Expenses took out Rs. 80,200/- to Rs. 89,200/-. Not including the savings amount.

While Low Priority Luxury and Leisure Expenses took out nearly Rs. 8,500/- to Rs. 12,000/-, which is on average 10% of the total available monthly income.

Your aim should be to impose a massive restriction on the Leisure and Luxury Expenses.

And a kind of expense that we didn’t even consider is impulse buying. Watching a youtube review of a dough maker and buying it on amazon – is going to take a massive toll on your financial health in the long run.

Leisure and Luxury Expenses cannot be more than 5% of the total monthly available income if you are only saving 10% of it.

Now, let us see another example of the monthly budget of a middle-class family living in a less expensive city in India.

Example of Monthly Budget for an Indian Family of 3 Members – [Example 2]

Here, we are going to assume that the 3 family members consist of 2 Earning Adults and 1 Child. And the family is living in Kolkata.

Again, location is specified because cost of living and income varies from place to place.

Income Section

We will write down each income that is generated every month. Any one-time income is not included here.

  1. Monthly Salary – According to Payscale, as of May 2021, a person working in Kolkata makes Rs. 3,89,000/- per year on an average basis. That is (3,89,000 / 12) = Rs. 32,416/- Per Month.
    Let us round that up to Rs. 32,500/- Per Month.
    Whereas,
    According to Salary Explorer, the average monthly salary of a person working in Kolkata is Rs. 35,000/-.

    We are going to take an average of both the estimation, and the monthly average salary comes out to be Rs. {(32,500 + 35,000) / 2} = Rs. 33,750/-.

    As there are 2 working adults in the family, the total income generated from salary will be (33,750 x 2) = Rs. 67,500/- at the end of the month.
  2. Income from Fixed Income Instruments – Here we will write any income that is generated from any Fixed Income Instrument like Monthly Income FD, Monthly Dividend from Mutual Funds, Income from Senior Citizen Savings Scheme or SCSS, etc.

    In a family of three where 1 of the member is a child, it is not ideal to create income from Fixed Income Instruments. It is better to let those returns compound year over year at this point.
    So ZERO Rupees is coming from Fixed Income Instruments.
  3. Other Incomes – Here we will write down any other income that is generated every month. It can be Rental Income, Extra Work Hours Income, Income from Freelancing, etc.
    Let us assume Rs. 10,500/- is generated in the form of Other Incomes.

So the Total Monthly Income for the family stands at Rs. 78,000/-.

Expense Section

This is the section where all your focus should be on.

Here, we are going to write down all the expenses according to the priority classifications discussed before in this article.

Before planning any expenses, we should save at least 10% of the monthly income. Although the ideal saving percentage is 20%. More is better.

  1. Savings 10% of the Total Monthly Income comes out as Rs. 7,800/-.
    For the sake of easy calculation, let us bump that up to Rs. 8,000/-.

    And as usual- Before you start saving in any kind of Mutual Fund, PPF, Bond, Equity, etc., it is very important to have an Emergency Fund.

    Here, we have an in-depth article, covering every nook and cranny of the Emergency Fund.
    In that article, we discussed topics, starting from the definition of an Emergency Fund to how you can make one for yourself. So please do give it a read.

    Once you have a fully funded Emergency Fund, then you can start investing in Stocks, Mutual Funds, Bonds, PPF, etc.

    After saving 10% of the monthly income, we are left with Rs. 70,000/- for the month.
  2. High Priority Expenses
    A) Monthly Ration – Rs. 3,500/-

    B) House Rent –
    The average rent for a 2 BHK Apartment in Kolkata will cost you in the range of Rs. 12,000/- to Rs. 16,000/-.
    Whereas,
    The average rent for a 3 BHK Apartment in Kolkata will cost you in the range of Rs. 22,000/- to Rs. 30,000/-.

    C) Children’s School Fees and Tuition –
    The monthly fees for the Xth Standard in a decent CBSE Board Private School will be around Rs. 8,000/- to Rs. 10,000/-.

    D) Life Insurance – Rs. 800/- to Rs. 1,000/- Per Month

    E) Medical Insurances for a single person – Rs. 500/- to Rs. 700/- Per Month
    Medical Insurance for the whole family (Husband, Wife and 1 Child) – Rs. 1,000/- to Rs. 1,200/- Per Month
  3. Medium Priority Expenses
    A) Utility Bills (Electricity, Cooking Gas, Water, Garbage Disposal, etc.) – Rs. 5,000/-

    B) Broadband Internet (60 Mbps Unlimited Plan) and Cable TV Bills – Rs. 1,000/-

    C) Monthly Mobile Recharge – Rs. 500/-

    D) Transportation –
    If using Public Transport – Rs. 2,000/- to 3,000/- Per Month

    If using Private Car – Rs. 10,000/- to Rs. 12,000/- Per Month (Considering the price of Petrol is Rs. 100/-, and each day 3 to 4 Litres of Petrol is consumed)

    E) Household Help (Maid, Cook, etc.) – Rs. 5,000/- to Rs. 7,000/- Per Month
  4. Low Priority Expenses
    A) Going To a Movie Theatre Once a Month – Rs. 1,000/- to Rs. 1,500/-

    B) Family Dinner in a Decent Restaurant – Rs. 1,500/- to Rs. 3000/- Per Month

    C) Mini Vacation and Miscellaneous – Rs. 2,000/- to Rs. 3,000/- Per Day

In the above scenario, the High and Medium Priority Expenses had cost us in the range of Rs. 38,300/- to Rs. 62,300/-. That is nearly 54.7% to 89% of our monthly available income.

Nearly 90% of our monthly income is going into the High and Medium Priority Expenses. Around Rs. 10,500/- is being spent on the Leisure and Luxury Expenses, which is more than 10% of the available monthly income.

If your monthly income post-savings is around Rs. 70K, then you cannot spend 10K Rupees to “Enjoy Life”. At the most, you can afford only 3K to 4K Rupees of life’s enjoyment. The rest of it goes to an investment account of any sort.

That was it.

Hope you like the whole explanation we did about the Monthly Budget and how you can utilize a Monthly Budget to save more money. If you have any question or query, do ask us in the comment section. We will definitely try our best to answer it.

If you liked our work and was able to learn something from the 2 Examples of Monthly Budget we showed above, then kindly Upvote us using the button below. It motivates us to write more such articles.

If you think you friends and family will benefit from such an article then please share this article with them.

Sharing is Caring and it just a click away! 🥰

And as usual, in the end we will say –

Good Luck and Happy Saving. 😊

Disclaimer: The views, investment tips, presumptions, and calculations expressed on Moneypremier.net are not of the website or its management. This article is for Educational Purpose only. Moneypremier.net advises users to check with certified experts before making any financial decisions.

What do you think?

Written by Sayantan Chakraborty

I have been investing in the Indian stock market for more than 8 years. I have invested in the Indian Stock Market via Mutual Funds, ETFs and Direct Stocks. I have seen multiple markets cycle, and from my experience, all I can say is persistence is the key to succeed in the Indian Stock Market, as an investor.
I also Love reading financial books and company results and reports.
You can ask me anything on Twitter by clicking on the button below.

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

      Loading…

      0

      How To Buy Cryptocurrency in BitBns? – Pictorial Guide

      pay kmc property tax online how to pay kmc property tax online how to pay kolkata municipal corporation property tax online can you pay kolkata municipal corporation tax online which website do you use to pay kolkata municipal corporation tax online property tax in kolkata

      How to Pay Kolkata Municipal Corporation Property Tax online?