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Why a Budget is Not the Same as a Financial Plan

A Budget is Not the Same as a Financial Plan

The terms “budget” and “financial plan” are sometimes used interchangeably. However, in my mind, there are differences between the two. I have a budget for each month, along with an over-arching financial plan. To me, a budget is more of a short-term spending plan and a financial plan is long-term with multiple goals and steps along the way. Here are some of the differences between a budget and a financial plan. Budget First, let’s talk about what makes up a budget. A budget is a listing of your expenses and financial obligations and is a guideline for your spending. It may contain categories, like housing, utilities, groceries, etc. In addition it is usually for a specific time period, such as a monthly budget or a weekly budget. Generally your expenses are broken down into a budget and then totaled so they can be compared to your income for the same period of time. In this way, income and expenses can be compared so adjustments can be made to help you achieve balance in your personal finances. Financial Plan Now let’s examine what a financial plan is. A financial plan helps you to evaluate your financial state using your budget as ...

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