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Budgeting and financial planning may sound like similar concepts, but they’re very different from each other. Budgeting typically focuses on reducing expenses, while financial planning includes methods to increase savings and earn more money. To make the best use of both, it’s important to understand the difference between the two and why each one is important. Here are some ways to tell if your budgeting process could stand to be more financially planning-oriented.

How do you track your expenses

You need to track your expenses in order to make sure you’re on budget. To do this, use a spreadsheet with the following columns: date, category of expense, amount of expense, and reason for the expense. Once you start tracking your expenses like this, you’ll have a better idea of where your money is going!

Is Your Budgeting Really Financial Planning?
Is Your Budgeting Really Financial Planning?

How does budgeting help with your long-term goals

Budgeting is a great tool for short-term financial planning. It helps you stay within your means and keep track of your spending habits. This can help you reach your long-term goals when it comes to things like debt repayment, savings, and retirement because budgeting provides a clear picture of what is coming in and out.

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Why do I need to plan my finances

Planning your finances is about more than just budgeting. It’s about knowing what your financial situation is and where it’s going. You need to know how much money you have, how much you’ll need, and what kind of investment strategy will make that happen.

When you make a saving goal, what is it based on

Your savings goal should be based on a percentage of your income. For example, if you make $40,000 per year, then you should save at least 10% of that ($4000). If you make $60,000 a year, then you should aim for 15% ($6000).

Do you live below your means?

Many people think they are budgeting when they are really just living below their means. Living below your means is a way of life that most people should follow in order to save more, spend less and live comfortably. It takes a lot of discipline and work to live below your means, but it will set you up for success in the long run.

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Does your savings goal take your future into account?

Many people set a savings goal, but they don’t take their future into account. For example, if you know that your income will increase in the next few years, you might want to adjust your savings so that it takes this into account and puts more money in the bank now.

Is Your Budgeting Really Financial Planning?
Is Your Budgeting Really Financial Planning?

How often do you review your finances?

It’s important to review your finances and goals on a regular basis. A lot can happen in between reviews, from major life changes to smaller fluctuations in your income. Don’t be afraid to change your plan along the way as you learn more about yourself, your spending habits, and the financial world around you.

Do you review your finances with someone else?

I typically review my finances with someone else and that has helped me see things I may not have otherwise. The financial planner I work with at my bank is also a Certified Public Accountant (CPA) so he or she can really help you see the big picture.

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Does reviewing your finances put you in control of them?

It is important to review your finances on a regular basis. This will help you understand where your money is going and how much of it you have. By reviewing your finances, you can better see what needs improvement and what needs to be cut out. Reviewing is also a great way to get an overview of your financial situation and see how it changes over time.

When was the last time you calculated how much money you have saved up?

It can be hard to think about long term savings when you’re trying to cover your monthly expenses. But the truth is, if you don’t have any money saved up for a rainy day, you’re not really ready for one. When was the last time you calculated how much money you have saved up?

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By Niva Lohit

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