Final answer:
Balancing a budget means managing income so that it is sufficient to cover expenses and savings, aiming for a situation in which income minus savings minus expenses equals zero, indicating financial stability without surplus or deficit.
Step-by-step explanation:
Balancing your budget means ensuring that your expenses do not exceed your income. When we say that income minus savings minus expenses equals zero, we imply that the income is being utilized either for consumption or savings, without incurring any debt. For example, if a household’s income is $50,000, and the calculated consumption is the same amount, it indicates that the savings are precisely zero and the budget is balanced. However, when income is less, like $20,000, and consumption is higher, at $26,000, this represents a deficit or 'negative savings' of $6,000, which means that the household is spending more than they earn.
Creating a budget involves tracking money flows, identifying wasteful expenditures, and ensuring that one's financial goals are on track. The primary objective is to manage the income in a way that covers fixed expenses, allows for consumption, and facilitates saving for the future. Therefore, a balanced budget refers to the condition when income is appropriately allocated to meet current needs while also addressing future savings, resulting in neither surplus nor deficit.