Zero-Base Budgeting

In these times of economic hardship it is particularly important to hold onto your money and stretch your dollars as far as they will go. For the householder with a family to consider budgeting is a must. The budgeting method I found that works best for me is zero-base budgeting. This method is the way I have run my personal finances all my adult life and it works really well.
I first heard about this method when Jimmy Carter was president of the United States in the late 1970s. This is the type of budgeting he employed to balance the budget in Georgia when he was governor of that state and he also used it in the federal budgeting process once in the White House. Carter got the idea from Peter Phyrr, a manager at Texas Instruments, who originally came up with the idea of zero-base budgeting. Zero based budgeting was eliminated in the federal budgeting process in 1981, but elements remained in place throughout the Reagan, Bush, and Clinton administrations.
When I was a manager in industry we also employed a type of zero-base budgeting, even though I had a traditional type of budget to work with. Money was so tight that we had to justify every dollar spent whether it was budgeted or not. If one department needed to spend some money on a piece of equipment, for example, the other departments were expected to help them out by not spending even if they had money to spend.
The way zero-base budgeting works is that every item in the budget must be justified before an expenditure is made. The budget starts with zero dollars. Every item of income is accounted for and budgeted. Any money spent must be balanced by money not spent in other places. This might be what is called in in the modern lexicon, “paid for.”
The term zero-based budgeting differs in its meaning to different people. Some experts say that there should be zero difference between your income and your expenses each month. In this methodology, the individual starts with a blank page and lists all sources of income on one side and all their expenses on the other. A spread sheet is also helpful for this exercise. This will help you control every dollar earned and every dollar spent. From there you look at ways to reduce unnecessary or excessive spending such as eating out or buying clothes.
The way I do it is a little less formal. I have it fixed in my head how much money I have to spend and I don’t spend a dime more than is necessary I justify every single expenditure. This method has served me well over the years and has allowed me to remain solvent even through the tough times.




Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s