Financial plans and budgets can help you be financially successful now and in the future. Yet, while the two go hand-in-hand, they are not the same. Here are some key differences to help you distinguish between your budget and your financial plan:
- Where you’re going vs. where you are today: While a budget helps you map out your key expenses and plan for the weeks and months to come, a financial plan allows you to set a course toward funding financial goals that are 5, 10, or 20 years down the road. A good financial plan may address your income and expenses, taxes, insurance, estate planning, retirement, education needs, and other topics.
- Strategies vs. tactics: Creating a financial plan requires building a long-term strategy for getting you where you want to go, while building a budget means money management for the day-to-day. However, having a grasp on how much money to budget once your expenses are paid lets you know how much money can be put toward the goals defined in your financial plan.
- Long-term vs. short-term: With a financial plan, you typically track your progress on a quarterly or semi-annual basis. With a budget, you record your income and expenses on a weekly or monthly basis. Generally, the closer you stick to your budget, the more progress you will make on your financial plan.