What is the difference between a budget and a financial record?

What is the difference between budgeting and financial planning?

In the world of finance and savings, there are two terms that have been misunderstood at the same time and again. Well, yes, we are talking about financial planning and budgeting.


If you are among those who have misinterpreted these terms for years, this article is just for you.


Through this article we will help you out with the details of financial planning and budgeting and their key differences as well as the relationship between the two.


Stick till the end to drop your confusion here itself once and for all.


What is budgeting?


Before understanding the differences between the terms, let’s first understand what budgeting and financial planning are.


I’m simple terms we can define budgeting as a way to manage the finances at individual or business level on a specific interval of time, be it weekly, monthly or quarterly.


Suppose you have X amount for the month of, say, July. Before spending your amount here and there you must have a blueprint of all your savings goals as well as expenses. This blueprint is known as budgeting. It is the allocation of your available funds in different segments per your priority and requirements.


What is financial planning?


Financial planning is the strategies you have planned to implement to achieve your long-term financial requirements.


There are several ways in which financial planning can help you save better. Some fields include tax savings, savings for higher education or your health savings, weddings, etc.


A smart financial plan will keep track of your progress toward goal fulfillment on a quarterly or semi-annual basis. When it comes to financial planning, you may wish to create a portfolio that details your cash flow and assets.


Understanding your current financial condition helps you to forecast your financial future. It also assists you in defining your financial objectives and developing a strategy for achieving them based on your specific preferences. Financial planning is beneficial since it helps you to create quantifiable financial goals and guides you on how to spend your money while making key financial decisions.


What’s the difference between a financial plan and a budget?


From the short introduction of both the terms mentioned earlier in this article, you might still be confused with both the terms.


Although they seem to be similar at first, there is a key difference in both.


Budgeting is all about what you will be doing for a shorter period of time at maximum it will be 3 months.


On the other hand, financial planning is all about what you will be doing or where you are going. It’s more about your plans for kids, for retirement

etc that will happen in the future.


Although it might sound like they are the same, financial planning and budgeting focus on different things.


In the case of financial planning, there are a lot of things that one needs to consider, including inflation, source of money, priorities etc.


A budget looks more at the day-to-day money management and ensuring you have enough right now. A budget will cover daily, weekly, and, most likely, monthly expenses. A budget is primarily concerned with day-to-day techniques for managing your money in the present.


It could cover a year’s worth of expenses, but it wouldn’t go much further. It is a tool for short-term planning. Following your budget contributes to your entire life and financial goals.


Can Budgeting Help In Your Financial Planning?


Many people seek financial planning services in order to accomplish financial goals such as retirement. These individuals’ experience and knowledge are unquestionably significant. However, not everyone can afford to engage a financial advisor to handle their accounts and give financial guidance. A budget allows everyone to take better control over their finances and achieve their goals. Financial gurus would all agree on the necessity of budgeting and how it affects everyone’s lives.


What Comes First, a Budget or a Financial Planning?


A budget is usually developed before a financial prediction. A budget shows the form or direction of a company’s finances, whereas a forecast shows whether or not the organization is fulfilling its financial goals as described in the budget. Long-term financial forecasting may be done without initially creating a budget, although it will most likely rely on prior budget key indicators.

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