Topic: Financial planning or budgeting? Which one is better to help us reduce our expenses?

What are the advantages of financial planning over budgeting?

Understanding where you spend your income can help you to meet immediate needs, assess your financial picture and make the best use of your resources. A clear picture of your financial situation can help you understand the difference between necessary expenses and extras. Developing a monthly budget is often the first step in managing your income and expenses. The more realistic your budget, the easier it will be to follow. Review your budget regularly to see what expenses you can reduce or eliminate. Financial planning is a process that can help you reach your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.

Budgeting is just a small part of financial planning. In general, financial planning includes
- identifying financial goals
- investing appropriately towards the goal
- Analysing and managing cash-flow
- Identifying and ensuring protection(insurance)

Budgeting is a part of your cash-flow analysis. In budget, you assing(and try to stick to it) parts of income to different types of expenses. Once these part are idetified, you clearly know how much money you are left with for investment.

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This message was edited 1 time. Last update was at 13/08/2009 12:37:24

Budgeting is key component of financial planning. Budgeting helps in reducing our expenses where as financial planning helps us achieve our all financial goals in the life.
If we draw a pie chart (circle) and we define it as financial planning than budgeting would be one of the key component inside that pie chart. Click on financial planning to get a better understanding of the concept.

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