What is 'balanced budgeting'?

Balanced budgeting refers to a method of financial planning where total income is equal to total expenses. This approach ensures that a person or organization does not spend more than they earn, thereby avoiding debt accumulation. By equating income and expenses, it promotes financial stability and encourages individuals to live within their means.

This concept is fundamental in personal finance as it fosters responsible spending and saving habits. When individuals practice balanced budgeting, they must prioritize their spending, ensuring that their financial resources align with their needs and goals without exceeding what they earn. This helps in maintaining a healthy financial situation and can prevent the stress that comes from debt.

The other options describe different financial scenarios or strategies—such as having income exceed expenses, which could lead to savings or investment opportunities, or focusing on luxury spending—which do not embody the essence of balanced budgeting.