Comments on: What the Heck is a “Zero-Based Budget?” http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: Zain http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/comment-page-1/#comment-40751 Zain Mon, 06 Nov 2006 15:05:23 +0000 http://allthingsfinancialblog.com/2006/08/28/what-the-heck-is-a-zero-based-budget/#comment-40751 I disagree with the definition of a zero-based budget. A budget is a tool used to predict/project costs in a future period. A zero-based budget is one of the many different models that is used to predict/project costs when you preparing a budget. What the 'zero-base' means is that, when costs are predicted/projected using this basis, you start with a base of zero, determine the expected activities that would be performed and cost those activities in arriving at a budgeted figure. This is unlike a historical cost based budget, which would begin with an examination of the historical spending levels, which would then be adjusted for abnormal activities in the previous period or abnormal activities expected in the forecast period. Whether budgeted income equals budgeted expenditure or not, how savaings are managed, etc. has nothing to do with a 'zero-based budget'. Hope this helps I disagree with the definition of a zero-based budget.

A budget is a tool used to predict/project costs in a future period. A zero-based budget is one of the many different models that is used to predict/project costs when you preparing a budget.

What the ‘zero-base’ means is that, when costs are predicted/projected using this basis, you start with a base of zero, determine the expected activities that would be performed and cost those activities in arriving at a budgeted figure.

This is unlike a historical cost based budget, which would begin with an examination of the historical spending levels, which would then be adjusted for abnormal activities in the previous period or abnormal activities expected in the forecast period.

Whether budgeted income equals budgeted expenditure or not, how savaings are managed, etc. has nothing to do with a ‘zero-based budget’.

Hope this helps

]]> By: JLP http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/comment-page-1/#comment-22837 JLP Wed, 30 Aug 2006 16:44:24 +0000 http://allthingsfinancialblog.com/2006/08/28/what-the-heck-is-a-zero-based-budget/#comment-22837 Thanks everyone for your comments. I guess my point is that a REAL budget does have a place for everything, even if the "remainder" goes into savings. A true budget should have areas for savings so that savings is a priority. Any leftover amounts should be in excess of the savings category, which would make that amount serve as a miscellaneous category. I think the term "Zero-based budget" is much ado about nothing. Thanks everyone for your comments. I guess my point is that a REAL budget does have a place for everything, even if the “remainder” goes into savings. A true budget should have areas for savings so that savings is a priority. Any leftover amounts should be in excess of the savings category, which would make that amount serve as a miscellaneous category.

I think the term “Zero-based budget” is much ado about nothing.

]]> By: Jesse http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/comment-page-1/#comment-22835 Jesse Wed, 30 Aug 2006 16:32:35 +0000 http://allthingsfinancialblog.com/2006/08/28/what-the-heck-is-a-zero-based-budget/#comment-22835 I agree with Frugal to a degree, but I would advise people to make sure that money flowing into savings is automatically drafted from your checking account and MOVED. It's far too easy to spend "savings" when it's supposed to happen after expenses have been addressed. A zero-based budget is powerful. It's a way of making sure every dollar that flows into your life is doing something meaningful. I agree with Frugal to a degree, but I would advise people to make sure that money flowing into savings is automatically drafted from your checking account and MOVED. It’s far too easy to spend “savings” when it’s supposed to happen after expenses have been addressed.

A zero-based budget is powerful. It’s a way of making sure every dollar that flows into your life is doing something meaningful.

]]> By: frugal http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/comment-page-1/#comment-22697 frugal Tue, 29 Aug 2006 18:28:59 +0000 http://allthingsfinancialblog.com/2006/08/28/what-the-heck-is-a-zero-based-budget/#comment-22697 I don't budget like that. Unless you're in negative cash flow when you don't budget, otherwise, just let all the remaining dollars flow to your bottom line (or saving accounts). When your focus is at cutting down expenses, saving automatically follows. I don’t budget like that. Unless you’re in negative cash flow when you don’t budget, otherwise, just let all the remaining dollars flow to your bottom line (or saving accounts). When your focus is at cutting down expenses, saving automatically follows.

]]> By: NCN http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/comment-page-1/#comment-22658 NCN Tue, 29 Aug 2006 14:16:25 +0000 http://allthingsfinancialblog.com/2006/08/28/what-the-heck-is-a-zero-based-budget/#comment-22658 JLP.. Dave Ramsey talks about a zero-based budget, and he basically supports the idea of "spending every dollar, on paper, before the month begins..." In other wordes, every dollar has a place to "go" during the month... towards bill, debt reduction, savings, etc... but you are right, that's what a budget should be anyway... NCN JLP..
Dave Ramsey talks about a zero-based budget, and he basically supports the idea of “spending every dollar, on paper, before the month begins…” In other wordes, every dollar has a place to “go” during the month… towards bill, debt reduction, savings, etc… but you are right, that’s what a budget should be anyway…
NCN

]]> By: Foobarista http://allfinancialmatters.com/2006/08/28/what-the-heck-is-a-zero-based-budget/comment-page-1/#comment-22621 Foobarista Tue, 29 Aug 2006 07:52:53 +0000 http://allthingsfinancialblog.com/2006/08/28/what-the-heck-is-a-zero-based-budget/#comment-22621 I'd guess it's an "accountant's budget", meaning you have explicit allocations to savings and regard it as an "expense" for computation purposes. For us, we budget around savings targets instead of spending targets - I'm too lazy to enter every grocery line item, etc into the PC - although we audit ongoing expenses every couple of months to make sure nothing has creeped up. I’d guess it’s an “accountant’s budget”, meaning you have explicit allocations to savings and regard it as an “expense” for computation purposes.

For us, we budget around savings targets instead of spending targets – I’m too lazy to enter every grocery line item, etc into the PC – although we audit ongoing expenses every couple of months to make sure nothing has creeped up.

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