Budget vs Spending Plan February 23, 2008
Posted by BDO in Descriptions.Tags: budget, Debt, financial, money, plan, spending, spending plan, success
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I have no degrees in the English language. But there is something more than just a connotation difference of the terms creating a budget and creating a spending plan. Donna Freedman alluded to this fact in her blog.
A lot of us who are trying to beat debt are trying their hand at creating a budget, thinking we are also creating a spending plan. A budget is “an estimate, often itemized, of expected income and expense for a given period in the future” according to Dictionary.com. While this definition accurately describes what we need to do to beat debt, which is to balance our income to our expenses, there needs to be more preparation before this step. Before we start creating our budget and trying to balance our income and expenses, we need to ask ourselves why and where we want this tool called money to take us.
The answer to these questions leads us to the actual definition of creating a spending plan. A spending plan is not specifically the same definition of a budget, though said in some circles. A spending plan is a strategy of where we want our money going now and into the future to accomplish a mission. The tool we use to accomplish this mission is a budget, but the overarching idea on why and where we are going is created with the spending plan.
One of the first steps to beat debt, before establishing a budget, is establishing a spending plan. A spending plan creates word pictures of what we would like to achieve. A budget puts meat on the spending plans bones and helps us to get to our financial destination.
An example of a spending plan goal could be:
When I pay off the balance of $7,000 on our Ford Escape by adding $100 a month to the principle, I will celebrate by treating my family out to eat to our favorite restaurant.
As you can see, with this goal I can know why and where I want to put my money to achieve this goal. With those questions answered, I can now reshape my budget to achieve my spending plan and achieve my goal.
Practicing the two ideas of a spending plan and a budget we will be on our way to achieving great financial success.
What is your spending plan? What goals have you set for yourself that a budget will enable you to achieve?
A Kid's Guide to Managing Money (Ready-Set-Grow Series)
[...] BDO wrote a fantastic post today on “Budget vs Spending Plan”Here’s ONLY a quick extractWhen I pay off the balance of $7000 on our Ford Escape by adding $100 a month to the principle, I will celebrate by treating my family out to eat to our favorite restaurant. As you can see, with this goal I can know why and where I want … [...]
Hi,
Its really fantastic to read this kind of the post .This is really a good creation . This is really awesome .A billion here and a billion there, and pretty soon you’re talking real money.Money never made a man happy yet, nor will it. There is nothing in its nature to produce happiness. The more a man has, the more he wants. Instead of filling a vacuum, it makes one..