Budget

Definition

A budget is a financial plan that outlines expected income and expenses over a specified period. It helps individuals manage their finances by tracking their spending and saving goals.

5 Must Know Facts For Your Next Test

1. A budget typically includes categories such as housing, food, transportation, and entertainment.
2. Creating a budget involves estimating both fixed and variable expenses.
3. Tracking actual expenses against the budget helps identify areas where adjustments may be needed.
4. Emergency funds are an important component of a personal budget to cover unexpected expenses.
5. Budgeting can help in achieving long-term financial goals like saving for education, retirement, or major purchases.

Review Questions

• What are the main components that should be included in a personal budget?
• Why is it important to track actual expenses against your budget?
• How does having an emergency fund benefit your overall budgeting strategy?

Related terms

Income:

Money received, especially on a regular basis, for work or through investments.

Expenses: The costs required for something; the money spent on different categories.

Savings: The portion of income not spent on current expenditures and set aside for future use.