What Is the Purpose of a Budget?

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The purpose of a budget is to ensure that a household’s or business’s expenses do not amount to more than the income. A budget can also help individuals properly allocate money to different categories to ensure that all of the basic needs of the family or company are met.

There are many different kinds of budgets, but one popular option is the zero-based budget. In these types of budgets, the income is divided into categories until there is nothing left unassigned. This is where the zero comes in. A budget only works, however, if it is adhered to, and if more is spent in a category than was allotted, the budget will be considered in the red.