A strategy for handling your personal or business finances is a necessity. However, there is more to financial well being than keeping your head above water. As former Morehouse College president and civil rights activist Benjamin E. Mays has been credited with saying, “The tragedy of life doesn’t lie in not reaching your goal. The tragedy lies in having no goal to reach.” A budget and a long range plan are both valuable tools for financial planning.
Long Range Planning
For individuals and households, long range plans include goals such as career changes and family planning, along with developing the financial outline for how and when you will achieve these goals. You may need or want to develop a checklist that enables you to determine whether you are making progress. Over the course of time, your goals may change, resulting in the need to alter some aspects of your plan or even to start over from scratch.
Many people are familiar with budgeting; it is an important aspect of financial planning for many households. Your household budget may include items such as rent or mortgage payments, a car note, education or retirement savings allocations for utilities, groceries and other necessities. A budget may also include items such as an emergency fund and investment instruments. A ledger or other means of record-keeping determines whether the funds available are adequate to meet the needs at hand.
Specified Versus Open Ended Period
While the financial specifics of each household or organization are different, every budget deals with the concrete financial aspects of a household, business or other entity for discrete period of time -- a month, a year or sometimes longer. A long range plan looks beyond the immediate financial horizon; in many cases the time frame involves several years. Neither a finite or an open ended framework is intrinsically "better"; both immediate, concrete budgets and long range planning have a role in promoting financial well being.
Maintenance Versus Vision
Budgets deal with the here and now as well as the near future. A budget where finances are adequate illustrates where the money is going. A budget where finances are inadequate may provide insight about where problems lie as well as possible areas where adjustments can and should be made. The main focus of a long range plan is not necessarily on money, but rather on illustrating strategies and actions for achieving desired goals that may or may not involve finances.