Does budget play an important role in financial Planing?

Financial planning 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 are5,10, or20 years down the road. A good financial plan may address cash flow issues, 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. 

Budget is a plan for a definitive time period. It is the based on the past and future trends along with the strategies of the organisation. It acts as a guideline for financial planning. Financial planning is undertaken around the budget. Financial planning is important to meet with the budget. Similarly, financial planning is required while formulating the budget.

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