Financial Planning and Budgeting
Financial
planning is a term, which is used to refer to the process of estimating
the capital required and its competition. In actual terms, it is the
process of framing financial policies in relation to procurement,
investment and administration of funds of an enterprise.
In simple
terms, we can say that budgeting is a process of creating a plan to
spend your money. Creating a budget helps one to find in advance,
whether they will have money to spend on things or not.
Difference between Financial Planning and Budgeting
Ilan Korchmar
is of the view that budgeting is an incredibly important financial
strategy. It helps in evaluating how much you spend, measure how much
you spend and help you spend less. Though financial planning helps you
create a comprehensive portfolio after studying you current financial
state. It helps you to predict your future cash flow, asset values and
withdrawal plans based on the information of your current state.
Budgeting,
actually focus on what you do with your money. It emphasis on immediate
money issues, whereas financial planning focus on what you can be with
your money. Financial planning considers your whole life.
Where in
budgeting focuses on planning your money strategy for the current
situation, on the other hand financial planning focuses on planning your
money strategy for the whole life.
Where,
budgeting tells you how to spend your money for the month or according
to the budget, financial planning helps you in guiding about the way you
spend your money yet keeping in mind the idea of savings too.
While
creating a budget, you need to have a look at first how much you earn,
then determine how much you will need to maintain your current
lifestyle, later deciding on to a plan says Ilan Korchmar.
Once, you have decided the budget for you, you can create a
spreadsheet, in which you can trace on your way if spending the money.
The plus
point of creating a budget is that it allows you to spend consciously
throughout the month, this helping you decide where you are going to
spend your money. This will not only ensure the balance in your
chequebook, but also ensure you oat your bills on time, this helping in
maintaining your monthly budget.
Financial planning helps in forecasting the realistic steps which you can take when a new opportunity arrives says Ilan Korchmar.
It helps you in projecting the steps you can take for risks the risks
for your business, planning your wedding, having children, supporting
your children in college, retiring and passing your estate.
Where
budgeting is vital for financial plan, financial planning on the other
hand provides a slow and steady approach for spending money on keeping
in mind the realistic spending of money throughout the life.
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