What Is Zero-Based Budgeting (ZBB)?
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What Is a Zero-Based Budget?
How Does Zero-Based Budgeting Work
Members of your organization identify programs, activities, or “decision units” that the organization could implement, such as after-school programs. Members of the organization then prepare a “decision package” explaining the goals or objectives of the proposed programs. They also explain why the programs are necessary and how the programs could be implemented in different ways. Members of the organization rank the proposals in descending order of importance and refer them to a higher level of management. Top members of the organization make a final ranking decision on the budget proposals and allocate resources in the most efficient manner. There’s no guarantee these programs will be continued in the next budget cycle, because ZBB starts from zero regardless of current or past activities.
Pros and Cons of ZBB
Example of a Zero-Based Budget
Zero-Based Budgeting vs Other Methods
Starting a Zero-Based Budget
Go through the process thoroughly and properly Understand that ZBB is about building a budget from the ground up Put the necessary time, effort, and energy toward reviewing all proposed budget items Be willing to cut proposed budget items if you determine it’s in the organization’s best interests Consult with members of your organization when making budget allocation decisions Consider the goals, objectives, and financial projections of the organization when planning or finalizing the budget
3 Money Tips
To get into the savings habit, consider having 10% of your paycheck directly deposited into your savings account. Or, set up a small automatic recurring transfer from your checking account into your savings account on the same day each month. An emergency fund is a key financial safety net. Aim to have three- to six-months worth of living expenses tucked away in a separate account that earns interest, but allows you to access the money if needed (such as a high-yield savings account). To set up a simple monthly spending budget, consider the 50/30/20 rule. This involves splitting your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings.
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