Budgeting - Financial definition
Concise definition of the term budgeting
Budgeting is the process of creating a plan to manage an individual’s or organization's income and expenses over a specified period. This entails allocating resources, forecasting revenues, and controlling expenditures.
Comprehensive definition of the term budgeting
In a broader context, budgeting involves the systematic allocation of financial resources, projecting future income, and planning expenditures to achieve specific financial goals. It is a critical tool for both individuals and organizations to ensure financial stability and effective resource management. For example, households create monthly budgets to track spending on necessities like housing, food, and utilities, while businesses develop annual budgets to forecast revenues and allocate funds to various departments.
Market practices in budgeting can include zero-based budgeting, where every expense must be justified from scratch, and rolling budgets that are continuously updated throughout the year. Effective budgeting helps in making informed financial decisions, avoiding debt, and planning for future investments or savings.