What is a budget?

A budget is defined as a financial plan that outlines expected income and expenditures over a specific period. This comprehensive plan helps individuals or organizations make informed decisions about managing their resources. By projecting how much money will come in (income) and how much will be spent (expenditures), a budget allows for better control of finances and aids in achieving financial goals.

Understanding this concept is essential in personal finance, as it provides a clear framework for tracking expenses and savings, highlighting areas where adjustments may be necessary. Setting up a budget can also help prevent overspending and encourage responsible financial behavior, leading to improved overall financial health.