May 7, 2025
Did you know that nearly 75% of Indians don’t have an emergency fund? Financial security is not just about making more money; it’s about managing what you have wisely. Yet, many people struggle to keep track of their spending, set realistic savings goals, and build long-term financial stability.
Learning how to budget and save money is essential for reducing financial stress and having more control over your future. If you want to pay off debt, grow an emergency fund, or start investing, the right financial habits can help you reach your goals faster. In this guide, we’ll break down actionable strategies to help you build a strong financial foundation and make your money work for you.
Understanding your actual take-home pay is the foundation of effective budgeting, especially as India’s household savings rate has fallen from 22.7% of GDP in FY21 to 18.4% in FY23. To build a successful budgeting strategy, it’s crucial to know exactly what you’re earning each month and manage it wisely.
● List all revenue streams: salary, side gigs, rental income, bonuses, and freelance work.
● Account for irregular earnings like seasonal work or performance-based bonuses to get the full picture.
● Your gross income isn’t what you actually spend. Always use net income, which is the amount after taxes, insurance, and deductions.
● Example: If your monthly gross salary is ₹50,000 but you take home ₹45,000, use the lower amount for budgeting accuracy.
● If your income fluctuates, base your budget on the lowest-earning month in the past year to avoid overspending.
● Build an income buffer by saving extra earnings in high months to cover lean periods.
Pro Tip: Use a budgeting app to track all income sources and deductions automatically. The app will help you avoid mistakes and ensure you're working with the most accurate numbers.
Struggling with variable income or freelance finances? Topmate’s financial mentors can help you stabilize your income flow and create a budget that works—even when your paychecks don’t look the same each month.
Now that you know your income, let’s break down your spending to see where your money is really going.
Getting a clear understanding of where your money goes is the first step in taking control of your finances. With nearly 48% of households in India reporting a decline in both earnings and savings, most people are unaware of their monthly spending. This makes expense tracking essential for gaining better financial control. Here’s how you can do the same:
● Keep a log of every transaction, from fixed bills like rent to impulse purchases like coffee runs.
● Use budgeting apps such as Mint, Wally, or MoneyView, or simply maintain a spreadsheet to categorize spending.
● Set a weekly review reminder so that no expense is overlooked.
Categorizing your expenses in the following way makes it easier to spot overspending patterns:
● Fixed Expenses: Monthly commitments like rent, utilities, insurance, and loan payments.
● Variable Expenses: Fluctuating costs such as groceries, dining out, entertainment, and shopping.
● Irregular Expenses: Annual or occasional costs like holiday gifts, subscriptions, and emergency repairs.
Pro Tip: Keep a separate savings account for irregular expenses and replenish it monthly to avoid financial strain when these costs arise.
● Analyze your past three months of spending to identify trends.
● Ask yourself: Are there non-essential expenses that could be cut? Could reallocating funds improve savings?
Pro Tip: Try a spending challenge; limit non-essential expenses for 30 days and track the savings you accumulate.
Now that you know where your money is going, the next step is to build a custom budgeting system that aligns with your financial goals. Let’s explore how to create a budget that works for you.
Selecting the right budgeting method is essential for managing your finances effectively. Explore these proven strategies and choose the budgeting method that truly fits your lifestyle.
This simple yet effective strategy allocates 50% of your income to essentials (e.g., rent, groceries), 30% to discretionary spending (e.g., dining out, travel), and 20% to savings or debt repayment.
Example: If your take-home pay is ₹40,000, your budget breakdown should be:
● ₹20,000 for necessities
● ₹12,000 for wants
● ₹8000 for savings and debt repayment
With this approach, every rupee is allocated to a specific purpose. Your income minus expenses should equal zero, thereby ensuring that you have full control over your money. This approach works best for those who wish to track their expenditures in detail.
Pro Tip: Use tools like Wally or Money View to automate budget tracking and reduce manual effort.
This hands-on approach involves meticulously dividing your budget into separate spending categories and managing them using cash (or digital envelopes). Once a category's budget is exhausted, spending stops.
Why It Works: This technique helps control impulse spending and enforces financial discipline.
Pro Tip: Carefully set up automatic transfers to savings categories before you start spending on wants.
With a budgeting system in place, it’s time to focus on what really matters—setting clear financial goals and growing your savings.
A well-structured budget is more than just numbers; it’s a clear roadmap to financial success. If you're planning for a big purchase or securing your future, establishing clear and realistic financial goals will help you stay on track.
● Create an emergency fund covering 3–6 months of expenses. According to a survey, only 25% of Indians have such a fund.
● Pay off high-interest debt to free up cash flow for future savings.
● Example: Save ₹6,000 in one year by setting aside ₹500/month in a high-yield savings account.
● Try to think about long-term plans and save for retirement, a home down payment, or funding education.
● Use compound interest to your advantage: Contributing ₹300/month at a 7% annual return can grow to over ₹50,000 in 10 years.
● Maximize your tax savings by investing in eligible financial assets like PPF, NSC, and ELSS under Section 80C, allowing you to claim deductions up to ₹1.5 lakh and reduce your taxable income.
● Ensure your goals are Specific, Measurable, Achievable, Relevant, and Time-bound.
● Instead of having a mindset to "Save more money," refine it to "Save ₹1,00,000 for a car within 18 months by setting aside ₹5560 per month."
Pro Tip: Automate savings by setting up recurring transfers.
Need help turning your financial goals into actionable steps? Topmate coaches will help you define SMART goals, prioritize savings, and build a plan you’ll actually stick to. Book a session today.
Maintaining consistency is imperative when it comes to saving. Automating your savings eliminates the guesswork and makes it easier to stay on track with your financial goals. By setting up automatic transfers, you ensure that a part of your income is saved before you have the chance to spend it, creating a reliable and stress-free approach to building wealth over time.
● Schedule direct deposits from your paycheck into a separate savings account before you even get to see the money.
● Consider the 50/30/20 rule: Allocate 20% of your paycheck for savings to ensure financial security.
● Some Indian banking apps like Deciml now offer round-up features that round off your purchases to the nearest ₹10 or ₹100 and automatically transfer the spare change to a savings account or investment fund.
● Small, automatic savings can add up to thousands of rupees annually without having a major impact on daily spending.
● Contribute enough to take full advantage under Section 80CCD: You can claim deductions for your pension contributions, up to 10% of your basic salary and DA, up to ₹1.5 lakh. Plus, your employer’s contribution is also deductible separately—it’s literally free money that helps build long-term wealth.
● Maximize your savings with Section 80CCD(2): By contributing to the National Pension Scheme (NPS), you can claim an extra Rs. 50,000 in deductions. Together with other contributions, this can bring your total savings up to ₹2 lakh—another chance to take full advantage of free money for future growth.
Pro Tip: To make the most of Section 80CCD, aim to contribute regularly to your pension account and set up automatic increments in your contributions.
Smart saving also means cutting unnecessary expenses. Let’s explore how to identify and reduce wasteful spending.
One way to improve your financial health is to identify where your money is being spent. Unnoticed expenses, like unused subscriptions or impulsive purchases, can exhaust your monthly budget. Avoiding these unnecessary expenditures can help you save more and spend on more meaningful things.
The majority of the people pay for services they rarely use. Review your monthly subscriptions and cancel the ones you don’t need. The average household saves hundreds of rupees per year by canceling 3–4 unused subscriptions. Utilize apps like Spendee or GoodBudget to track and manage recurring expenses.
Pro Tip: Set a reminder every 3 months to audit your subscriptions and cancel anything you no longer use.
Daily spending adds up quickly. Small changes in your spending habits, as enlisted below, can save you a chunk of money annually.
Pro Tip: Set a weekly spending challenge to see how much you can cut without sacrificing your quality of life.
Strategizing your shopping in the following manner can help you maximize your savings without compromising on quality:
● Buy seasonal items off-season—winter coats in summer and holiday décor in January come at deep discounts.
● Take advantage of cashback apps like Cred or PayTM for extra savings on everyday purchases.
● Use discount codes and coupons before making online purchases.
Pro Tip: Plan on making big purchases around major sales like Diwali, end-of-season sales, and clearance events.
Overwhelmed by your monthly spending habits? Topmate experts can audit your spending, spot hidden leaks, and help you plug them for good. Schedule a personalized review today.
Budgeting isn’t rigid—it should evolve with your lifestyle and financial goals. Review your expenses regularly to ensure your budget aligns with your changing financial situation.
Ensuring your budget is up-to-date is key to financial success. Regularly revisiting your income and expenses allows you to identify spending patterns, adjust for unexpected costs, and keep your financial goals on track. Building this habit gives you greater control over your money and helps you make informed financial decisions.
● Compare actual spending to your planned budget. Identify areas of overspending or surplus.
● Utilize tools like Wally, Mint or MoneyView to automate tracking and highlight trends.
● Significant life events such as job changes, raises, or new expenses, demand budget adjustments.
● If you get a raise in your monthly income, consider increasing savings or investment contributions.
● If expenses rise unexpectedly, look for areas in your life to cut back on without sacrificing essentials.
● If you spend less in one category, redirect the surplus to debt repayment, emergency savings, or investment accounts.
● Unexpected windfalls? Allocate a percentage to savings before spending on discretionary items.
● Prioritize high-interest debt to reduce financial strain over time.
Pro Tip: Set a calendar reminder for a monthly financial check-in to evaluate your progress and make necessary changes.
By consistently reviewing and refining your budget, you set yourself up for long-term financial stability and success.
Building financial resilience involves smart budgeting, proactive financial planning, and long-term wealth building. Staying committed to these habits helps you prepare for challenges while creating a stable and prosperous future.
At Topmate, we’re here to support you. Our platform provides expert coaching, financial tools, and resources to help you stay organized and achieve your goals. Whether you’re starting your first budget or refining a long-term plan, you can connect with our experienced financial coaches for guidance and explore our growing library of insights on how to budget and save money effectively.
Take charge of your financial future today. Sign up for Topmate now to explore our resources and connect with experts. Your journey to financial success starts here—let’s achieve it together!
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