What is a budget primarily used for in personal finance?

A budget is primarily used for managing cash flow, which involves planning and monitoring income and expenses over a specific period. By creating a budget, individuals can ensure that they are living within their means, identifying how much money is coming in and where it is being spent, thus allowing for better control of financial resources. This process helps in making informed decisions about spending, saving, and investing, ultimately leading to improved financial stability.

While tracking investments, estimating net worth, and calculating expenses are important aspects of personal finance, none of these activities encapsulate the primary function of a budget as effectively as managing cash flow does. A budget specifically serves as a tool to balance income against expenditures, which is essential for reaching financial goals and maintaining financial health.