Understanding a budget is important because it helps individuals manage their finances effectively, ensuring they live within their means. By knowing how much money is coming in and where it's going, people can make informed decisions about spending, saving, and investing. A clear budget can help prioritize financial goals, such as paying off debt or building savings, while also providing a sense of control over one's financial situation. Additionally, it helps avoid overspending, reduces financial stress, and allows for better preparation for unexpected expenses or future needs.
https://www.britannica.com/money/what-is-the-50-30-20-rule