We all want to live well and comfortably without busting our budget. We want to have the right amount of money when we need to pay the rent, utilities and other necessary expenses but still have some money left to buy those things we want. Oh, yes we want to have "financial control" as economists have put it. This way, you get to have the kind of clothes that you want to have without paying a big amount for it. By that, there is no suggestion that you buy those cheap imitations. There are plenty of nice clothes that are not branded and sold at a low price. By that, also, there is no suggestion that you should not purchase items from Victoria s Secret, Tommy Hilfiger, and the like. Tampering with the money allotted for electricity could give you a momentary joy or satisfaction on having purchased something else. But if you do not return to the budget the amount you have taken, then there will be some dark moments in your life as well. Your power will be cut off, until you pay. You have to make us of candles, instead of buying high-powered batteries for lamps, to have light in your house, but you must be careful not to burn your house down. The Australian National Audit Office has identified the advantages of activity based budgeting: The Advantages - Output costs are supported by a schedule of costed activities - Opportunities to examine work processes - Identifies non value-adding activities that can be eliminated - Basis of a performance measurement system and direct link between strategic goals and operational realities - Enables cost profiles to be managed - Accurate costing data for operational management - Costs are transparent, understandable and actionable Disadvantages - Activity definition may become too detailed and the model may become too complex and difficult to maintain - Underestimation of the task of collecting activity driver data - Implementation may be considered a financial management fad and there is insufficient commitment from operational managers Activity Based Budgeting Disadvantages - Usually requires buying Activity Based Budgeting software - Requires training of all managers including budgeting department - Requires people to really understand what drives their budget - Eliminates excuse that activity volume changed because it makes visible volume changes - Requires everyone to collect or estimate activity volume By understanding how resources are transformed into products or services, and byfocusing on the cost of activities, activity based budgeting helps an organisation to obtain a greaterunderstanding of how costs behave in their organization and which activities create significant amounts of cost. To better understand zero based budgeting, here's an example: Each department of an organization which uses zero based budgeting would have to justify its funding every year. That is, funding would have a base at zero. A division of that organization would have to show why its funding effectively aids the company towards its financial goals. Getting Serious with Personal Finance Budgeting Have you ever noticed that no matter how much money you make in a month, there is never enough? You most likely know how much you earned last month, but do you know how much you spent? If you dont, you are not the only one who doesn't. According to survey, most people spend 10% more than they make!