What Is the Difference Between a Budget and a Spending Plan?

Money experts tell us that in order to get our financial house in order, we should do a budget.

However, at the risk of being shouted out of the room, let me tell you that a budget is the WORST thing you can do to get your finances in order, for many reasons.


What's a Budget?

With a Budget, you record your income and expenses on a weekly or monthly basis.  You start with income, work out how much you need as an average pay cycle spend for each of your main expenses, allocate an allowance for general fun living expenses, and try to save the difference.


Income $870pw
Rent $200 (if sharing)
Electricity $25 ($650 per quarter divided by 13 weeks/2 if sharing)
Phone/internet $33 ($140/month x 12 / 52)
Rego $16 ($800/52)
Car Insurance $16 ($750/52)
Food $90
Fuel $50
Fun $300 (ie socialising, takeaways, activities, massages, hair, beauty)
Possible Savings $141pw


However, this method is doomed to failure. If for example, your car registration costs $800pa and you set aside $16pw ($800/52 weeks) in your budget to cover your registration, but it is due for payment in 8 months (35 weeks) time, you won’t have enough set aside to pay the bill by the due date. You will only have $560 (35 x $16) saved and will fall short. You will then have to fund the extra $240 from the money you had intended to set aside for Savings.

If this occurs will ALL of your bills – ie electricity, rates, telephone, registration, insurances - every time a bill arrives, you won’t have enough money in your main bank account, and you will feel like a failure with your money.

Most people trying to work with a budget will get to the next payday, only to find that instead of being able to save the difference between allocated expenses and income, there is nothing left, and they have no idea where all that extra money disappeared to or what they spent it on. They feel like they are a failure with their money.

Rest assured, it isn’t YOU that is at fault, it is the Budget.

This is because with a budget, people only look at past expenses. A Budget doesn’t take into account all the additional unpredictable expenses that life throws at all of us. So every time one of these unpredictable expenses occurs, we have to dip into the Savings account, and there is rarely anything left over.

Even worse - for many people, their expenses exceed their income, and this creates a snowball effect of escalating debt and often being in arrears – for example, their electricity bill was more than they could afford, so they had to go on a payment plan. They simply don’t know where to start. They don’t know what to do to successfully trim their expenses, or just don’t have the willpower to do so on their own.


What's a Spending Plan?

A Spending Plan, on the other hand, utilises future forecasting software, which identifies every single day in the next 12 months when you won’t have enough income to pay all your bills on time.

Spending Planners coach people on how to quickly and easily control spending, trim/reduce every possible expense and how to be fully prepared for all possible future unpredictable expenses.  We then integrate the critical 3rd factor into your Spending Plan – timing of when your bills are paid – and all those periods where you weren’t going to have enough money in the bank disappear. 

Suddenly there is enough money in the bank to be able to pay ALL your bills on time.  Future unexpected expenses and arrears are covered, and before you know it, you will have your debts paid off, and be saving rapidly for your goals. 

Achieving these results will occur considerably faster by engaging the services of a Spending Planner, who will work with you usually for a 6 month period.  They will support you and keep you accountable to the goals YOU have set for yourself, and provide education and strategies to successfully manage your money better going forward. 

They will pick you up if you fall off the wagon and “splurge spend” on unneeded purchases that you might regret a week later!  They will show you how to –

  • Properly plan your spending
  • Safely cease using credit cards and Pay Later facilities
  • Successfully save money
  • Navigate safely around all unpredictable, unexpected expenses
  • Quickly get back on track; and
  • Make the whole savings journey as simple and fun as possible!


The closer you stick to your Budget or Spending Plan, the more progress you will make on reaching your goals.  However, sticking to any budget usually isn’t easy.  If money isn’t closely monitored on a weekly basis, all too often we discover to our detriment that several hundred or even thousands, has slipped through our fingers and we don’t know where it has all gone.  That also means that once more we may be overspending and probably back in the position of not being able to afford to pay upcoming regular bills.

Spending Planners fully understand this, so they check in with you on a weekly basis to see how closely you are sticking to your Spending Plan.  If any accidental overspending has occurred in the week, it can be identified and addressed quickly to ensure it hopefully doesn’t happen again.  If this weekly overspending results in any future periods where you won’t have enough money to pay upcoming bills, your Spending Planner will show you what needs to be done NOW so those bills can be paid on time after all.

Clients have often advised that the most amazing thing about the Spending Planner Program is that although they had to slightly tighten the belt on some discretionary spending, they are NOT struggling in any way.  Their Plan always incorporates fun money – the difference being that it is for a set amount that the Plan calculates they are able to afford.  As long as they stick to that set amount, their bills will always be paid on time, savings are accumulating, and they can still enjoy the same fun activities.

 Spending Plans are all about Choices – we empower people to create a Spending Plan that will achieve their savings goals.  Your Spending Planner will make recommendations, however it is the clients themselves who have the final say and decide what expenses they want to retain, and what expenses can be adjusted temporarily in order to successfully achieve their savings goals.


Why Spending Plans Are so Important for Our Future Finances

In the past 12 years, the world has experienced several financial blows which have adversely affected everyone to some extent - the Global Financial Crisis (GFC), our local economies detrimentally effected by falling commodity prices, and most recently, Covid-19.

The disastrous worldwide effects from Covid-19 have made it obvious that we must all focus NOW on what we need to do to be prepared for more crises. No-one can anticipate what is around the corner. The person who says Covid-19 and the GFC were unprecedented events that won’t occur again, has their head buried in the sand.

We all need to be fully prepared for further rocky times.

Without taking these massive money draining events into consideration, we all experience other major events in our lives. They will leave us extremely stressed if we don’t have a solid buffer of funds, and access to our future forecasting software which provides the ability to see how adjusting expenses will make a massive positive difference to cash flow -

  • Having an unexpected serious illness or major injury
  • The birth or adoption of a child
  • Reduction in working hours or loss of a job
  • Major vehicle repairs
  • Veterinary expenses
  • Moving house - bond, rent in advance, removal costs, cleaner, repairs
  • Retirement
  • Marriage breakdown and separation/divorce
  • Wedding

It is NOT TOO LATE to improve your finances. Many clients have come to us with loss of income and very little (if any) money in the bank. We show them from the outset how they CAN not only afford our reasonable fees, but also start saving for their buffer emergency account and their dream goals.

People with a Spending Plan in place are well positioned to deal with any and all of life’s unprecedented events. They not only have the right tools to know how to adjust to lean times, but they are accumulating a solid buffer of funds they can call on if necessary to ensure their financial security.


So, in summary...

If you want to be successful with your money, and want to eliminate debt quickly and save successfully for your goals, ignore the money experts who tell you to do a Budget.

Consider instead, engaging a Spending Planner who will show you exactly what needs to be done to reach your goals, and who will also work closely with you to ensure your success.


Get Started with a Spending Plan Today and Achieve Financial Success!


Schedule a Free Consultation