Spending Plan vs. Budgeting

A budget and spending plan are tools that help you manage your money, but they’re different in mindset and approach. A Budget is a detailed financial plan that tracks income and expenses generally over the course of a month. With budgets there are generally different categories for where your money will go (savings, rent, food, car, etc.) A Spending Plan, however, is more flexible and focused on how you choose to use your money based on your priorities and goals.

Example:

Let’s say you bring in $3,000/month. A budget might look like this:

• $300 Savings
• $1,000 Rent
• $300 groceries
• $250 Utilities
• $150 eating out
• $550 Car Payment
• $140 Insurance
• $150 Cell Phone
• $160 for all other items

The process of creating a budget includes:

• Listing all sources of income (Job, birthday money, tax refunds, etc)
• Estimating fixed expenses (car, rent, mortgage)
• Estimating variable expenses (gas, groceries, entertainment)
• Assigning limits and tracking actual spending to make sure you stay in budget.

A Spending plan on the other hand, might ask you What do I value most this month? For example, if you are saving for a trip, you might reduce eating out to $50 and put the extra $100 into savings. You’re still tracking the expenses, but with more intentionality and flexibility. A spending plan may feel more empowering because it focuses on what you can do with your money.

A budget can feel restrictive: “I can’t spend more than $150 on eating out.” A spending plan feels more intentional “I want to put more towards savings, so I’ll cook more at home.” Both are useful, it’s all about mindset – use the one that motivates you and stick with it!