Definition
A plan for how you will use your income each month, listing money coming in and money going out.
What it means
A budget compares your income with your spending so you can see where money goes and plan ahead. Start with take-home pay, then list fixed costs such as rent, insurance and loan payments, and variable costs such as food and gas. Savings and debt payments are treated as planned items, not leftovers. Popular methods include the 50/30/20 approach, which splits after-tax income into needs, wants and savings, and zero-based budgeting, which gives every dollar a job. The FDIC's free Money Smart program and CFPB worksheets offer simple templates. Tracking for even one or two months often shows small regular expenses, such as unused subscriptions, that add up. A budget can be adjusted whenever income or costs change.
Example
With $4,000 a month after tax, the 50/30/20 approach suggests about $2,000 for needs, $1,200 for wants and $800 for savings and extra debt payments.
Illustrative numbers only. Your situation will differ.