While it doesn’t seem like there would be much of a difference between a budget and a spending plan, there are subtle differences that have a lot to do with your mind set. For many of us, the prospect of budgeting is unpleasant. It seems to imply sacrifice and limitations. A spending plan, on the other hand, implies a direct for your money to take, and financial goals to achieve. To me, a spending plan is a little more active and directed, while a budget is more about cutting things out.

Using a Spending Plan

Your spending plan is a way to direct your financial resources. Look at your resources, and decide where they would be of the most benefit to you. Rather than looking at where you have to cut back, as you would with a budget, consider what expenditures would help you reach your long-term financial goals. A spending plan might include money put into a retirement account, funds set aside to help others, or it might encompass saving up for a vacation. You can create a spending plan that brings you in line with your goals.

As part of the spending plan, you also decide what you want to spend money on each month. You can decide whether or not you want to spend money on eating out, or how much money you want to spend on groceries. If you have the mind set that your spending plan will help you reach other goals down the road, it seems a little less restrictive than thinking in terms of budget. With a budget, you set a dollar amount and the proceed to try to reach that amount each month. Sometimes it seems restrictive, since you say things like, “I can’t spend more than this.”

A spending plan, though, has a subtly different construction. It’s more in line with, “I’m going to spend this much on this.” There’s really not much to choose between the two, but the spending plan is couched in empowering language. Of course, you still have to be careful not to plan to spend more than you will actually have coming in, making sure to live within your means.

More Direction

To me, though, a spending plan provides direction. You may operate on a budget in order to save more money for something in the future, but it really does seem rather limiting to me, since the language associated with it is all about what you can’t do. A spending plan, though, seems a little more like actively preparing for the future. Rather than thinking about cutting costs, a spending plan seems to encourage thoughtful financial decisions. You are directing your resources in a way that allows you to accomplish what you want.

In the end, though, it’s largely a matter of how you perceive your planning efforts. I prefer using a spending plan to budgeting, making sure that the goals most important to me are taken care of first, and then not worrying too much about whether or not I’ve “gone over” in the entertainment category. As long as I remain within my means, and have planned for the future, I’m not too concerned about the rest of my budget categories.

What about you? Do you think there is a difference between a spending plan and a budget? What is the difference, and which do you prefer?



Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.