Description
This article explores the concept of zero-based budgeting, an accounting method that is making a comeback. While primarily used by organisations, zero-based budgeting can also be applied to personal finances, helping individuals review and justify expenses, understand their spending habits, and achieve savings goals. The article provides a step-by-step guide to creating a household zero-based budget and highlights the benefits and drawbacks of this approach in both corporate and personal settings.
Introduction
Ever heard of zero-based budgeting? No? Originally developed in the late 1960s, zero-based budgeting is an accounting method that has experienced a revival in recent times.
In conventional budgeting, expenditure from previous periods is used as a starting point and raised by a set increment, resulting in many costs and expenses not being reviewed for years.
Conversely, zero-based budgeting does not assume increased costs are a matter of course. Instead, it involves redrafting the budget from scratch every period by analysing and justifying all expenses.
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