15 Aug 2024
Did you know that 89% of Britishers are now on a budget? With the economy fluctuating massively, expats, including OFW in the UK, are facing much more difficulties than Britishers as they have to send money to Philippines from UK, which is an added expense. During such difficult times, all expats and local Britishers rely on different types of budgeting techniques to get through life. In this blog, we will introduce one of the most effective methods of budgeting, which is Zero-Based Budgeting.
ZBB is a very useful business-planning tool that can assist a company regulate spending, find and remove wasteful expenses, and concentrate on profitable projects. ZBB budgeting is the tactical application of a business's strategic plan. A company needs to convert its long-term plan into a precise set of projected revenues and expenses that can be measured to track performance in order to meet the financial and operational goals in the strategic plan. These can be improved and modified along the way to help the business stay on course to meet its objectives.
When Peter A. Pyhrr worked as an account manager at Texas Instruments in the US in 1969, he came up with the concept of zero-based budgeting. He also came up with the idea 'Zero-Base Budgeting: A Practical Management Tool for Evaluating Expenses', which is his groundbreaking book on the subject, which was published in 1977. When he prepared the budget for the fiscal 1973 year, Jimmy Carter, who was the governor of Georgia at the time, was the first person in government to implement zero-based budgeting. This specific budgeting technique can significantly help you in maximizing your remittances to the Philippines.
Read More: Maximising Your International Remittances to the Philippines: Understanding Exchange Rates and Fees
ZBB is superior to traditional budgeting in many ways. Although ZBB has a terrible reputation for being a pure cost-cutting exercise, it can assist you match spending with additional chances to generate money. ZBB has several benefits, such as reduced expenses, budgetary flexibility, and strategic implementation. The activities that provide the biggest revenue are given priority when each expense is thoroughly examined.
ZBB helps to avoid the misallocation of resources that occurs when a budget develops gradually over time, expenses are frequently decreased. As an OFW in the UK, you might find this concept helpful in managing the finances of your company and receiving credit for doing so. If not, you can use this strategy in your personal life to save money and increase the value of your online money transfer to Philippines from UK.
Although ZBB is a useful budgeting technique, putting it into practice can be difficult. Budget creation is far more time-consuming than standard budgeting since it involves starting from scratch. ZBB may have the unexpected consequence of favoring immediate cost savings over long-term gains. Some important expenses, like research and development or long-term strategic projects, may be neglected in an attempt to reduce costs.
There are different ways to create a budget of this kind. The following steps encompass a method of budgeting for the use of an OFW. However, this may easily translate to a business context. The steps include:
Actually you can decide the period of your budget whichever period you want to set. It could be your wish to have your budget correspond to the cycle of your paycheck. If you are paid monthly, you can decide to have an annual budget if you are willing to have a long term plan. When preparing, do not allocate inadequate time to work on it because you have to finish the preparation of the actual budget before the time limit.
The first thing that should be done in the process of planning a budget is to list down all possible sources of income that you may have across the defined period of time to have a chance to determine your potential monthly budget. If the person has only a regular paid job that provides him or her with all the necessary funds, then, perhaps, the task will be much easier. This may be more complex if you have income from other sources like other jobs or income from rent, or interest on savings, among other inputs.
You may categorize your expenses over the period of several months, more so where the expenditures differ each month. One needs to know the frequency of spending and the categorization of the amount one spends on various needs.
Categories could include:
If you have a monthly budget, you may wish to spread out your annual payments over the course of the year by dividing them into 12 equal parts. There are fixed expenses that will not be spent on every month, or their value may change with each month; thus, reconciling the expenditure across several months may be needed to come to the mean of an expenditure type.
After you have got all the meanings of the expense qualification described and have put in your average charges for each type of expense, it may be helpful to combine the types of expenses into several groups, which will give you an idea of the general picture of your budget. The groups could include the following:
Leaving your expenses in this format is the first step, and after doing so, the next thing to do is to allocate your source of income to each of the groups you have just created. It means that every pound that you make should be spent according to this budget. If there is a remaining derivable income after funding all the categories, it may be desired to contribute to one of the savings categories. If you have a situation where you are left with less income before you get to distribute it through all your categories, then you may try to look at the possibility of cutting down expenses in other categories.
When you have worked out your budget and decided on certain figures, it is time for the practical application. Record every dollar spent over the timeline of your budget, assigning your expenses to the categories and expenses you developed. You can do this intermittently while doing the work or extend yourself and dedicate time to do it every day or every week. Ideally, you want to attempt to record your entire spending during the course of your budget period, so you may want to add other categories if the above spending does not fit those categories.
Through this budgeting, you can save a lot of your income and refrain from spending uselessly. ACE Money Transfer can help in reducing the costs associated with remittances like transfer fees and currency conversion. Sign up on ACE for free and send money to Philippines online from UK for absolutely free on your first transfer.
Yes, various financial software programs can automate the ZBB process, making it less time-consuming.
Businesses with fluctuating expenses or those looking to cut costs strategically benefit the most from ZBB.
ZBB might be less effective in industries with highly predictable and stable expenses.
Training programs and workshops can help employees understand ZBB's principles and practices.
If not appropriately communicated, ZBB can be seen as cost-cutting, potentially affecting morale; clear communication about its benefits is crucial.
