Zero-based budgeting
Assigning every dollar of income a job until nothing is left unassigned.
Zero-based budgeting means giving every dollar of your income a specific job — spending, saving or debt — until the amount left unassigned reaches zero. The zero is not money left in your account at the end of the period; it is money left undecided at the start. The method forces the decision forward, so income arrives already allocated rather than waiting to be spent.
Worked example
You are paid $2,400 a fortnight. Rent takes $900, groceries $400, transport $180, bills $220, eating out $150 and debt $250 — that is $2,100 assigned, leaving $300 undecided. Under zero-based budgeting you do not stop there: the last $300 goes somewhere too, say $200 to a car-service fund and $100 to a holiday goal. Now the unassigned figure is zero.
Common mistake
Thinking a zero-based budget means spending everything, or that a leftover balance means you did it wrong. Assigning $300 to savings is a job like any other — the target is zero unassigned, not zero in the bank.
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