A token budget is the maximum number of input plus output tokens that an application allocates to a single model request, constrained by context window limits and cost targets.
Budget Planning Factors
Budget Allocation Process
- Determine business cost ceiling (USD / request).
- Translate to max total tokens using provider pricing.
- Subtract constant prompt overhead.
- Allocate remaining budget between context expansion (e.g., retrieved docs) and expected output.
Design Trade-offs
- Larger budgets improve answer completeness but raise latency and price.
- Tight budgets may truncate retrieved evidence, reducing factuality.
- Dynamic budgets per request optimize spend but complicate monitoring.
Current Trends (2025)
- Automatic context compression selects most relevant sentences to fit within budget.
- Providers expose pricing simulators that calculate cost before invocation.
- Clients track rolling average tokens / request to stay within monthly budget1.
Implementation Tips
- Log input and output token counts separately.
- Warn users in UI when they approach budget limit.
- Back-off retrieval depth when context window <10 % free.