What is the purpose of a budget?

A budget serves as a financial tool that enables individuals to plan effectively for their future financial goals while also controlling their spending habits. It involves estimating income and expenses over a specific period, typically monthly, to ensure that one can allocate resources towards necessary expenditures, savings, and investments. This structured approach allows people to prioritize their spending, avoid overspending, and achieve their financial objectives, such as saving for college, purchasing a home, or preparing for retirement.

By using a budget, individuals can maintain a clearer picture of their financial situation, leading to informed decisions that align with their short-term and long-term goals. This proactive measure helps to recognize potential financial issues before they arise, ultimately leading to more stable financial health.