A budget is a written record of income and expenses during a specific time frame, typically a year.
You use a budget as a spending plan to allocate your income to cover your expenses and to track how closely your actual expenditures line up with what you had planned to spend.
An essential part of personal budgeting is creating an emergency fund, which you can use to cover unexpected expenses. You also want to budget a percentage of your income for saving and investing, just as you budget for food, housing, and clothing.
Businesses and governments also create budgets to govern their expenditures for a fiscal year - though like individuals they make regular adjustments to reflect financial reality. And like individuals, businesses and governments can find themselves in trouble if their spending outpaces their income.
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- Financial plan, Spending plan
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