what is a budget 
a budget refers to an estimation of revenue and expenses that s made for a specified future period of time budgeting usually occurs on an ongoing basis with individual budgets being re evaluated regularly budgets can be made for any entity that needs or wants to spend money including governments and businesses people and households of any income level investopedia julie bangunderstanding budgetinga budget is a microeconomic concept that reveals the trade off made when one good is exchanged for another in terms of the bottom line or the end result of this trade off a surplus budget means profits are anticipated a balanced budget means revenues are expected to equal expenses and a deficit budget means expenses will exceed revenues these principles hold true whether the budget is intended for an individual a family or a company first let s take a quick look at the budgeting process for a corporation and then personal budgeting corporate budgetsbudgets are an integral part of running any business efficiently and effectively corporate budgeting begins by establishing assumptions for the upcoming budget period these assumptions are related to projected sales trends cost trends and the overall economic outlook of the market industry or sector specific factors affecting potential expenses are addressed and monitored the budget is published in a packet that outlines the standards and procedures used to develop it including the assumptions about the markets key relationships with vendors that provide discounts and explanations of how certain calculations were made the sales budget is often the first to be developed as subsequent expense budgets cannot be established without knowing future cash flows budgets are developed for all the different subsidiaries divisions and departments within an organization for a manufacturer a separate budget is often developed for direct materials labor and overhead all budgets get rolled up into the master budget which also includes budgeted financial statements forecasts of cash inflows and outflows and an overall financing plan at a corporation the top management reviews the budget and submits it for approval to the board of directors there are two major types of budgets static budgets and flexible budgets a static budget remains unchanged over the life of the budget regardless of changes that occur during the budgeting period all accounts and figures originally calculated remain the same a flexible budget has a relational value to certain variables the dollar amounts listed on a flexible budget change based on sales levels production levels or other external economic factors both types of budgets are useful for management a static budget evaluates the effectiveness of the original budgeting process while a flexible budget provides deeper insight into business operations derek notman cfp chfc cluintrepid wealth partners llc madison withe importance of budgeting cannot be understated a budget also known as cash flow is arguably more important than the actual cash that you have in your bank and investment accounts your cash flow is what allows you to pay for everything or not without knowing your cash flow you could be putting yourself into a bad financial situation and not even know it you can only get by without knowing your cash flow for so long before you get into financial trouble so make the time to know the flow of your cash budgeting should be something that everyone does regardless of their financial situation personal budgetsindividuals and families can have budgets too creating and using a budget is not just for those who need to closely monitor their cash flows from month to month because money is tight almost everyone can benefit from budgeting even people with large paychecks and plenty of money in the bank may find it difficult to cover the expense of an unexpected home repair to manage your monthly expenses prepare for life s unpredictable events and afford big ticket items without going into debt budgeting is essential keeping track of how much you earn doesn t require you to be a math whiz and doesn t mean you can t buy the things you want 