The Complete Guide to Managing a Monthly Budget for Beginners

1. Determine Your Financial Goals

Before you start budgeting, you need to know what you're going to use your money for. Do you want to save for a vacation, buy a new gadget, or pay off debt? Setting clear goals will motivate you to stay committed.

These goals can be divided into two types:

• Short-term goals (less than 1 year): For example, collecting emergency funds or buying a new cell phone.

• Long-term goals (more than 1 year): For example, a down payment on a house, retirement funds, or children's education costs.

2. Calculate Net Income

The next step is to calculate your total income after taxes and other contributions. This is the amount of money you actually receive each month and can use for shopping, saving, and paying bills.

Example:

• Monthly salary: Rp. 5,000,000

• Side income: IDR 500,000

• Total Net Income: Rp5,500,000

3. Record all your expenses

This is the most crucial step. For a full month, record all your spending, no matter how small. You can use a notebook, a spreadsheet on your computer, or a financial management app.

Group your expenses into several categories:

• Fixed Expenses: Expenses that remain the same amount every month. Examples: rent, car payments, insurance, and streaming subscriptions.

• Variable Expenses: Expenses that can change. Examples: monthly groceries, eating out, transportation, and entertainment costs.

• Fringe/Unexpected Expenses: Expenses that are not routine, such as car repairs or birthday gifts.

4. Create a Budget Based on the 50/30/20 Rule

Once you have a clear picture of your income and expenses, it's time to create a plan. One of the most popular methods for beginners is the 50/30/20 rule.

• 50% for Needs: These are the essential costs for living.

  • Examples: Housing costs, electricity and water bills, transportation, and grocery shopping.

• 30% for Wants: These are expenses that are not mandatory but improve your quality of life.

  • Examples: Eating out, going to the movies, subscribing to the gym, and buying new clothes.

• 20% for Savings and Debt Repayment: Prioritize your future.

  • Examples: Emergency funds, investments, retirement funds, and credit card or loan debt payments.

Example of Applying the 50/30/20 Rule (Income Rp. 5,500,000):

• Needs (50%): Rp2,750,000

• Desire (30%): Rp1,650,000

• Savings & Debt (20%): Rp1,100,000

5. Monitor and Adjust Your Budget

A budget isn't a rigid rule. Throughout the month, keep track of your spending. If one category exceeds the limit, try reducing spending in other categories to maintain balance.

At the end of the month, review your budget. Are there any categories you frequently overspend on? You may need to adjust the percentages for the following month. Managing a budget is a process of learning and adapting.

Additional Tips for Success

• Use an App: Many free financial management apps can help you track expenses automatically. Examples include Wallet, Money Lover, or Toshl Finance.

• Separate Accounts: Consider having separate accounts for spending, saving, and investing. This will make it easier for you to track your financial goals.

• Pay Yourself First: After your paycheck, immediately set aside 20% for savings and investments before spending it on anything else. Think of it as a bill that needs to be paid.

• Don't Be Too Rigid: A budget that's too strict will be difficult to maintain. Give yourself room to enjoy life so you don't feel stressed.

By following this guide, you can start your financial journey with more planning. The keys to success are consistency and a willingness to continue learning.