What is the primary purpose of a budget?

The primary purpose of a budget is to manage income and expenses effectively. A budget serves as a financial plan that outlines expected income and allocates funds to various expenses over a specific period, typically a month. By categorizing spending and setting limits on how much can be spent in each category, individuals gain better control over their financial situation. This process helps identify areas where money may be overspent and allows for adjustments to be made to ensure that expenses do not exceed income.

While saving for retirement, tracking investment performance, and evaluating credit scores are important aspects of personal finance, they are not the main functions of a budget. A budget is foundational for achieving broader financial goals, including retirement savings, but its core aim is the day-to-day management of finances.