To homemakers, a budget is an essential factor to keep the financial equilibrium of the entire household. To staff members, budgets get in the way of proposed activities. To finance committees, budgets hold staff members accountable. To most, it consumes too much time and effort. However, budgets are important to any person or organization's success. 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. Budgeting Tips Before you start budgeting, you need to know your monthly income first, mainly because almost everything is paid for by the month. Here are budgeting tips that can make the job easier for you. You can make use of a pie chart to keep your budgeting handy. In your chart, the most important necessity, which is food, should occupy the biggest slice of pie. Then you can eliminate it. Make sure to pay your bills on time. Use cash whenever possible and work out realistic payments with creditors to reduce financial liabilities. Consolidating debt into a low-interest loan could be a great solution for you. Or perhaps you just need a structured repayment plan. With budgeting, you will learn how much you are currently spending and how you can successful decrease your expenditures to help you make good savings for the rainy days. You are spending on a regular basis. Home payments and maintenance, utilities, auto maintenance and payments, insurance payments, child care and alimony, education, food, clothing, entertainment and travel are just few of the many things you spend your money on regularly. Personal budgeting is when you allot certain amounts for your personal needs. It is not as difficult as simply budgeting because you don t have to worry about whether other people would find your way of living livable or not. The first thing that you budget for yourself is, of course, food. Without food, you would not acquire the energy that you need to do the things you do daily.