Because of Christ’s finished work and out of our Union w/ Christ arises a two-fold benefit. One benefit is completely forensic, declarative, and judicial. This benefit is completely outside of us. It is the benefit of having Christ for us the Hope of glory. In this forensic benefit we have our sins gratuitously removed and we are imputed with the righteousness of Jesus Christ because of His sin bearing work in our stead and on our behalf. This we call justification/adoption.
The second benefit is renovative, transformative, and renewing. What God’s freely declares us to be, by His poured out Spirit He works in us to increasingly become. Incrementally and increasingly, though never perfectly we put off the old man of sin and put on Christ. This we refer to as regeneration/sanctification.
Both of these benefits imply the other. There is no salvation that is not constitutive of Justification (what Christ does for us outside of us) and Sanctification (What Christ does for us inside of us) but the relation between the two is important to think rightly about.
Justification leads to sanctification the way a rock thrown into a clear, glass like pond leads to ripples in the water. The ripples in the water are not the cause of the rock being cast into the water but those ripples are the necessary and inevitable consequence that the rock has indeed splashed. So sanctification is only a necessary aspect of justification the way that ripples are a necessary aspect of a rock being cast into the water.
Rome’s mistake here is that Rome wants to make the ripples in the water a contributing cause of the Rock being splashed. This is to place works in our justification and yield up a legalism.
The opposite error is to champion for a justification that minimizes sanctification. For example, Mike Horton has said that sanctification is just getting used to your justification. That is a minimalist approach that degrades both justification and sanctification. This is to absent works from our salvation and yields up a anti-nomianism.
In the past 15 years or so we have had, in the Reformed world, a donnybrook of a fight between the legalist error as embraced by Federal Vision theology and the anti-nomian error as embraced by Radical Two Kingdom theology. These two warring parties were each insisting that they alone were the keepers of the Holy Grail of Reformed orthodoxy when in point of fact those who were truly orthodox was wishing a pox upon both their houses. Neither one of these ugly extremes were correct and yet it seemed that everyone was taking up for one side or the other. The warfare between the two parties has subdued somewhat but it still is seething under the surface.
There is another error that enters in here and that is called “neo-nomianism.” Neo-nomianism reduces the demands of God’s requirement and then tells Christians that they can merit favor with God by the ability to achieve these now reduced and achievable requirements. Oddly enough, neo-nomianism is both legalistic (it teaches that God’s reduced law can be met) and antinomian (it teaches that God’s law requirements are lessened) at the same time.
The impact of the Gospel works outside of us and inside of us. We are never forensically declared righteous where we are not also transformed by the Spirit who was given us as a guarantee of that which is to come. Similarly, there is no interior renewal without a complete leaning upon Jesus Christ alone and His works imputed to us so that we might be pleasing to God.