Final answer:
A person should create a budget to control potential future debt and to manage and pay off current debt responsibly. It aids in tracking income and expenses, identifying unnecessary spending, and working toward financial goals.
Step-by-step explanation:
The question of why a person should create a budget is central to personal financial literacy. Creating a budget can serve multiple functions, such as helping to control future debt, manage current debt, and allocate funds to pay off existing debts on time. It is essential for tracking income and expenditures, identifying wasteful spending, and planning for financial goals, like saving for a purchase or investment. Understanding how to balance a checkbook, the effective use of credit, and risk management through insurance are all part of making more informed economic decisions. Thus, the most accurate answer to the student's question is:
- c. to control the amount of debt they may encounter in the future
- d. to manage and pay off their current debt wisely and on time
Budgeting can also be seen as preparing for long-term financial health by saving and investing early in life.