What describes a budget in the context of financial planning?

A budget in the context of financial planning is fundamentally an estimate of income and expenses over a specific period, typically organized monthly or annually. It serves as a roadmap for how a person or organization intends to allocate their financial resources, ensuring that they can manage spending in relation to their anticipated income. By outlining expected expenses against expected income, a budget helps individuals and businesses make informed financial decisions and prioritize their spending to achieve financial stability and reach their goals.

While financial goals (a list of what one aims to achieve) and investment plans are important aspects of overall financial planning, they do not constitute a budget. Furthermore, financial statements usually provide a historical account of income and expenses rather than a forward-looking estimate, which is what a budget provides. Thus, the definition that best captures the essence of a budget as a financial planning tool is that of an estimate of income and expenses over time.