Reasons for Zero-Based Budgeting

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Budget Item Review

  • A zero-based budget starts with zero when deriving next year's budget. The department or category of budget item must be legitimized each year to verify it is needed. Many budgets, including that of the United States federal government, are budgeted based on the previous year's budgetary number rather than on zero, assuming it needs at least that amount. This causes natural budget increases since there is a "built in" assumption of its necessity. In your home budget, examine each item as to its cost and necessity, not based on what you paid last year. Negotiate and cut as necessary.

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