For instance, if you plan to save $12,000 in the span of the next 12 months, then you need to save at least $1,000 a month to reach your goal comfortably. If you looking for ways to cut down on your food expenses, you should check out my post on how to save money on grocery shopping. When you start looking at your day-to-day expenses more closely, you will be surprised to find many wasteful expenditures that can be avoided. When you budget, you review each one of your expenses and you can easily find areas where you can cut down on your expenses. You can see your savings grow in a matter of time when you save first and then spend.

A forecast is a financial snapshot of the future as it is best understood today. When creating a forecast, teams must examine possible financial outcomes based on the most up-to-date drivers and assumptions. The result is a view of how the business is trending so that the leaders can determine whether or not adjustments should be made to the existing budgets or plans. A budget is made for a specific period and is usually based on past trends or experiences of the company. A financial forecast examines a company’s current financial situation and uses the information to forecast whether or not a budget will be met.

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While similar and often confused, these are two separate tools in your arsenal for business money management. You need budgeting for making specific plans and goals, and use financial forecasting to think about the long term and prepare for larger economic conditions. A forecast is an estimate or prediction of what your business will actually achieve. Forecasts tend to be more strategic than budgets, providing you with a roadmap of where your business is expected to go that’s based on historical data and business drivers.

Budget is the financial plan prepared by the business for its future economic activities. On the other hand, the forecast is just a prediction about future inflows and difference between budget and forecast outflows of the business organization. Both of these are financial planning tools that assist the senior management of the organization in the decision-making process.

Step 3: Make a list of your fixed monthly expenses

The purpose of a budget is to help you prepare for major life events in advance when you already know what you’re earning and how much are you spending. This gives you the power of directing your money and deciding how you want to spend it instead of losing track and spending it mindlessly. Your financial life can go completely haywire if you lose control of your finances. Well, it’s because the budget is the only tool that can help to improve your overall financial health.