A budget is a plan that sets the money a household expects to receive against the money it expects to spend and save over a stated period, usually a month. This lesson explains what a budget measures and how two common methods, the 50/30/20 guideline and the zero-based budget, divide the same income in different ways.
It matters because much of personal finance starts from the same two numbers: what comes in and what goes out. Saving, paying down a debt and meeting a bill on its due date all depend on the gap between them. A reader who understands how a budget is built can read any budgeting method, worksheet or app and see what it is actually counting.