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Some people use money tracking strategies like zero based, but there are also other options such as program budgeting. This strategy is typically used by organizations — but it could also be used by your household to save money.

Essentially, this strategy of budgeting goes beyond just simple line items. It allows users to provide more details and find more savings.

There are many benefits to having a program budget. It creates more transparency by showing how much things really cost. Program budgeting allows you to identify trade-offs among expenses. Additionally, this strategy allows you to compare different expenses to each other, and it allows you contextualize all spending based on actual performance metrics.

Program Budgeting Background

Unlike traditional budgeting, program budgeting aims to provide written details about every single expense in a budget. Its dates back to the Johnson administration in the 1960s. Robert McNamara, the U.S. Secretary of Defense, actually installed it as part of his plan to cut down on costs at the Pentagon.

Years later, there have been other governments that have embraced the program budget as a way to solve financial woes and to strengthen the public sector. Likewise, it is beginning to catch on within many private organizations as well.

Bringing Program Budgeting To The Personal Level

Although program budgets are typically used by governments and by organizations, you could very well implement the same strategies with your household budget.

The first step with any program budget is to identify costs of activities and goods over an extended period of time (like a month or perhaps a year). This process includes identifying all one-time expenses and reoccurring ones as well. And of course, with any program budget, you must describe in detail what each expense entails.

For example, your grocery budget might literally say the word “grocery” and just a dollar value next to it. But, with a program budget, you get to flesh out your grocery section by writing down every grocery item that you will buy each week, how much each item costs, how often you buy each item, and each item’s purpose.

Additionally, if any expense is tied to income, then you must calculate that with the spending. For example, if you work from home, then you must add in your work income along with the cost of household expenses like electricity and internet. By following this procedure, you can understand the true value of items in your budget.

Advanced Tips

Most organizations rely on program budgeting to cut down on unnecessary expenses. A true program budget clarifies the difference between personnel and non-personnel related expenses. Organizations use this data to associate personnel and non-personnel expenses with specific programs.

There are some difficulties with program budgets. It can be extremely costly and time consuming for newcomers. Additionally, within an organization, it sheds light on difficult budgeting decisions. In a household budget, this could be problematic.

Have you used program budgeting to save money? Let us know in the comments below.