Line-Item Budgeting: A Simple Guide for Personal Finance

The process of line-item budgeting is one that many companies and corporations use regularly. However, this practice can also be useful for individuals and their budgeting needs. Here are the basics of line-item budgeting for the individual.

Line-Item Budgeting

Line-item budgeting involves taking the budget from a previous period and modifying it for the current one. You will look at each expense from the previous period on a line-by-line basis. Then you will look at any new financial needs for your current period. You will then assess whether you need to increase the budget or decrease the budget depending on the new needs.

This can be a very detailed process. It will require you to look over your financial statements closely. You will have to decide whether an expense is justified and determine whether you should increase your budget. This can give you the ability to keep a close eye on your financial situation and look at the big picture. Many individuals use this to budget their expenses from month to month when variable expenses are involved.

What Is the difference between line item budgeting and zero-based budgeting?

Zero-based and line item budgeting are similar methods of budgeting for businesses. With line item budgeting, a business will look at each individual line item and assign a specific cost to it. With zero-based budgeting, every dollar that is available for the business will be allocated to a specific category. The company will allocate all of the money to different categories until there is no money left to spend on anything. This type of budgeting tends to prevent frivolous spending, and it allows a company to account for every dollar that goes out of the business.