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What Is a Budget?

Some people say, “I’m on a budget,” and mean nothing more than that they are limiting their expenditures. “I can’t go to dinner at Chez Pierre’s tonight because I’m on a budget.” In that sense, pretty much everyone is on a budget—after all, how many of us can spend money without limitations?

In another sense, a budget is a way to keep precise track of your money, how much comes in and how much goes out, and to determine how much you can and cannot spend on various things. Money that comes in is divided among the various budget categories, such as mortgage or rent, groceries, and entertainment. Each expense is likewise charged against the corresponding category. There are two main advantages to a budget.


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