What is a zero-based budget?

A zero-based budget is a plan for all of your income. Before the month begins, you divide your income between rent, groceries, a debt payment, savings and anything else you need. When there's nothing left to assign, you've reached zero.

Zero doesn't mean you have nothing left. It means nothing is left unplanned. Money you want to keep is still yours, planned as savings.

Why it works

• You decide first. Choices you make at the start of the month are calmer than the ones you make at the checkout.
• Nothing slips through. Small amounts with no plan tend to disappear. Every amount with a plan gets used on purpose.
• It fits any income. It works the same whether your money comes from a job, a pension, Social Security or your own business.

A budget isn't a cage

Many people think of a budget as a limit on their spending. It isn't. Your income is the limit, and it was there long before you made a budget. A budget decides where that income goes.

That often means more room for fun, not less. Say you plan $200 a month for dinners out and hobbies. With your bills, debt payments and savings already covered, you can spend all $200 and enjoy it. Without a plan, it's easy to hold back on the things you enjoy because you're not sure what's safe to spend, or to spend freely and feel guilty later.

In Dollarz

The bar at the top of your budget shows how much is left to assign. As you plan your spending, debts and savings, it counts down. When it reaches zero, it turns into a check mark and says Zero-Based Budget.

Your first budget won't be perfect, and that's completely normal. Most people find their rhythm by the third month.