Guides

How to budget your salary after rent and EMIs

When rent and EMIs take a big bite on salary day, most budgeting advice stops being useful. This is the order I use instead. It takes about ten minutes and ends with one number for the week.

1. Write down your take-home, not your CTC

Use what lands in your account each month after tax, PF and deductions. Your CTC includes money you never see in the month, so a budget built on it is wrong from the first line.

2. Take out rent or your home loan EMI

This is usually the biggest fixed line. If you share a flat, use only your share, including maintenance if you pay it every month.

3. Take out every other EMI

Car loan, personal loan, education loan, the phone or laptop you bought on EMI, and any credit card purchases you converted to EMI. These are easy to forget because they are small one by one.

4. Take out bills, subscriptions and insurance

Phone, internet, electricity, gas, streaming, gym, cloud storage. For anything you pay once a year, like insurance or an annual plan, divide it by 12 and count that much every month. Otherwise it arrives as a surprise.

5. Decide your saving amount and treat it as fixed

Pick a number you can actually hold every month, and move it out on salary day like rent. A smaller amount you keep beats a bigger one you dip into by the 20th.

6. Divide what is left by the days in the month

What remains is what you can spend on everything else. Divide it by the number of days in the month, not by four, and multiply by seven for a full week.

In a 30-day month that is ₹1,100 a day, or ₹7,700 for a full week.

What if the fixed lines are more than your pay?

Then there is no weekly number, and pretending otherwise does not help. Write down the gap so you know the size of it, and look at the biggest fixed line first. Knowing the gap is the first step to closing it.

Do it with your numbers

Varun Thakkar, founder of VThrive. Write to me at varun@vthrive.co.in if something here is wrong.