Webster defines Budget as an estimate of income and expenditure for a set period of time. I define a Cash Flow Plan as a detailed account of the movement of cash into and out of a families household that has been allocated and placed into multiple expense categories that have been previously decided, earmarked, and agreed upon by the family decision makers.
A budget alone is not a great tool to use for a successful financial journey. It is arbitrary guess of what you think your expected income and expenses are. It gives you no room for analysis and limits you to guessing if you met your monthly goals.
A cash flow plan on the other hand will help you develop a strategy that will guide you towards financial freedom. A cash flow plan will give you the necessary resources to allocate every penny you make into pre-selected categories that can be adjusted up or down on a monthly basis depending on your needs for that month.
It also give you the tools necessary to track your progress on a daily basis and know at a glance if you are on target or not. It gives you an immediate alert for mid-month adjustments and allows you to make clear purchasing decisions on the spot.
A well designed cash flow plan will give you the leverage to analyze your spending and to make adjustments that increase your cash flow and feed your bottom line. The object is to reduce or eliminate as much of the financial clutter that is robbing you from success. Look at your expenses and ask yourself, “Can I reduce or eliminate this expense so I can use the resources on other opportunities?”
You build wealth by saying no to the clutter and disciplining yourself to say yes to debt elimination, emergency savings and retirement planning.
Throw your budget away and begin to plan your cash flow so you can be a winner with money.
This is a great way of defining the two terms.