A budget is a financial plan that outlines a business’s or individual’s expected income and expenses over a specific period of time. The purpose of a budget is to help manage financial resources effectively by estimating future income and expenses and allocating resources accordingly. By creating a budget, individuals and businesses can set financial goals, prioritize spending, and track progress toward achieving those goals.
Budgets typically include two types of financial information: income and expenses. Income refers to the money that is expected to be earned during the budget period, while expenses refer to the money that is expected to be spent. Expenses can be further divided into fixed expenses, which are costs that remain the same regardless of the level of activity or production, and variable expenses, which are costs that fluctuate with changes in activity or production. By comparing income and expenses, a budget can help individuals and businesses make informed decisions about spending, saving, and investing.