Budget Definition
A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money.
To manage your monthly expenses, prepare for life's unpredictable events, and be able to afford big-ticket items without going into debt, budgeting is important. Keeping track of how much you earn and spend doesn't have to be drudgery, doesn't require you to be good at math, and doesn't mean you can't buy the things you want. It just means that you'll know where your money goes, you'll have greater control over your finances.
Understanding Budgeting
A budget is a microeconomic concept that shows the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a surplus budget means profits are anticipated, a balanced budget means revenues are expected to equal expenses, and a deficit budget means expenses will exceed revenues.
KEY TAKEAWAYS
- A budget is an estimation of revenue and expenses over a specified future period of time and is utilized by governments, businesses, and individuals.
- A budget is basically a financial plan for a defined period, normally a year that is known to greatly enhance the success of any financial undertaking.
- Corporate budgets are essential for operating at peak efficiency.
- Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and planning for contingencies.
- Personal budgets are extremely useful in managing an individual's or family's finances over both the short and long term horizon.
