What's the difference between a budget and a financial plan?
A budget is essentially a guideline to follow with regards to spending. It breaks down expenses into categories
(i.e. rent, electric bills, etc..) for a certain time period (usually weekly, monthly, or yearly).
Once all expenses are put into the budget,
they're added up to get a total. This figure is then used to subtract against the total amount of income made for the same
time period. The result is how much money can be saved for that time period. If the goal is to save more money, then expenditures can be changed or
dropped from the budget (if possible).
A financial plan..
A financial plan is a tool to help you achieve long-term financial objectives. It's kind of like a budget in that it
breaks down your expenses, but it's much more goal-oriented.
For example, let's say your goal is to save up a certain amount of money for retirement. A
financial plan would be your guideline for reaching that retirement goal. Financial plans also differ from budgets because they focus more on income
and assets including: bank accounts, pensions, home equity, etc.. A financial plan also will estimate how much money you will make from stocks, bonds,
mutual funds, 401Ks, etc..
The best of both worlds..
You can use our website to automatically create a hybrid of a "budget" and a "financial plan", based on your finances!
It only takes a few minuts to do, so why not give it a shot? Click here to start a budget/plan!