Goal-based Planning vs Cash Flow Planning: Which One Will Help You Go Where You Want?

When it comes to reaching your financial goals, there are many roads you could take—and they don’t necessarily all lead to the same place. In order to make an informed decision on which route you’ll take, it’s important that you know which options are available to you before you start your journey.

Goal-based planning and cash flow planning are two different popular approaches that financial professionals use to address the same problem: namely, helping you become and stay financially healthy. 

But there are plenty of differences between the two approaches. Today, we want to go into the key distinctions between goal-based planning and cash flow planning, and why we prefer goal-based planning.

Goal-Based Planning

What are your goals for tomorrow? How about for this month? This year? 

If you’re like most people, your goals are probably fuzzy at best and nonexistent at worst. 

Goal-based planning is designed to help people like you identify which goals are most important to you and then place them on a timeline so you can have something to work toward. It’s a way for you to quickly get from “I want to retire someday” to “I want to retire at age 65 with an income of $100,000 a year, and here’s how I could do it.” 

Goal-based planning starts with the end in mind by choosing your goals, whether you want to plan for retirement, save up for a house, get ready to pay for your kids to go to college someday, build your rainy day fund, or something else. 

Some people say goal-based planning is not the best approach because most people don’t actually know what their goals are, they just have a vague idea of what sounds good and don’t really know why they want that. While there is some validity to that claim, it’s important to keep in mind that goal-based planning is intended to be a holistic approach that helps you get to the heart of what you really want out of life. 

Until you know what you want, it’s hard to know why you want it. First, let’s figure out your goals, then if you need to dig deeper, you have a starting place to build from that can be adjusted as necessary.

We’re all about helping people take that first step of identifying your goals, your timeline and ultimately, your plan to get there.

Cash Flow Planning

If a goal-based approach is about understanding the bigger picture, cash flow planning is about nailing down the finer details.

Cash flow planning zooms in to show everything that is coming in and everything that is going out so you can figure out how much you have left over. If that sounds familiar, that’s because it’s basically the same thing as budgeting, but on a larger scale.

Of course, budgeting is a key part of any healthy financial plan, so it’s not that goal-based planning doesn’t involve budgets at all. It’s more that cash flow planning is a practical, boots-on-the-ground approach that uses budgets as a key building block, while goal-based planning is a high-level overview based on setting goals and then making everything work toward them.

Goal-based planning says the big picture should inform how you spend and save. Cash flow planning says how you spend and save should inform how and when you reach your goals. In the end, both things are true! But choosing an approach is about determining which one will help you stick to your plan and get to where you ultimately want to go.

If you want to buy a car by the end of year, goal-based planning asks, “How can you make it happen?” while cash flow planning asks, “Can you make it happen?” 

Both approaches are valuable, and both are intended to help you build a plan you can stick to—but we have a pretty clear favorite.

Why We Love Goal-Based Planning

The Lasso app was developed to help remove the barriers to entry for modern investors. We believe that you shouldn’t have to ace Financial Literacy 101 in order to prepare for your future and achieve your life goals.

We aim to help people who otherwise may not know how to build a plan or prepare for the future. 

We love goal-based planning because it starts with just a simple question: What are your goals? From there, goal-based planning provides you with a framework for determining how to achieve them. 

In other words, goal-based planning asks ‘where do you want to go?’ then helps you figure out the best route to get there with the flexibility to adjust in real-time. Cash flow planning, on the other hand, asks ‘what are all the lefts and rights you will take on your journey?’ Then tells you where you will end up based on that. 

We prefer a flexible approach that puts you in the driver’s seat. That is why we love goal-based planning and think it’s the best starting place. 

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