What is a budget?

A budget is a financial plan that outlines expected income and expenses over a specific period. This definition captures the essence of budgeting, which is centered around planning and managing finances. By estimating future income and expenses, individuals and organizations can make informed decisions about spending, saving, and investing. A budget helps track financial goals and ensures that resources are allocated efficiently to meet financial obligations.

The focus on outlining both expected income (revenue) and expenses is crucial. It allows for evaluating whether the available resources will cover the planned spending, thereby helping to prevent overspending and ensuring that financial stability is maintained. A budget can be helpful for various time frames, whether it is monthly, quarterly, or yearly, and can adapt to changes in financial circumstances.

The other options do not align with this definition. A report of past financial transactions refers to historical data rather than future financial planning. A legal document typically relates to formal agreements in financial transactions but does not constitute a budget. Investment strategies focus on maximizing returns without necessarily providing a broader view of income and expenditures as a budget does.