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A budget is a financial plan that outlines expected income and expenses over a specific period of time. It helps individuals, organizations, or governments manage their finances by estimating future revenues and costs to achieve financial goals effectively.
Here's a breakdown of key points about budgets:
1. Income: This includes all sources of money coming in, such as salaries, investments, or sales.
2. Expenses: These are the costs associated with running a household, business, or government, like rent, utilities, wages, or supplies.
3. Budgeting Tools: Tools like spreadsheets or budgeting apps help track income and expenses, allowing for adjustments to stay within financial targets.
4. Types of Budgets: Examples include zero-based budgeting (where every dollar is allocated), incremental budgeting (previous budget adjusted by a small amount), and activity-based budgeting (based on specific activities or projects).
5. Benefits of Budgeting: Budgets provide a roadmap for financial decisions, help monitor spending, avoid debt, save for goals, and prepare for unexpected expenses.
6. Budget Variance: This refers to the difference between planned and actual amounts in a budget, helping identify areas needing adjustment.
By following a budget, individuals and entities can gain better control over their finances and work towards achieving their financial objectives.
