What does "zero-based budgeting" involve?

Zero-based budgeting involves assigning every dollar to specific expenses or savings, meaning that you start from a "zero base" at the beginning of each budgeting period. In this method, every dollar earned is allocated to a particular purpose until there is nothing left to allocate. This ensures that all expenses are accounted for and encourages careful planning to optimize spending, savings, and investments based on actual income and financial goals.

The strong focus on detailed allocation in zero-based budgeting can help individuals or households to identify unnecessary spending, prioritize essential expenses, and increase savings or debt repayment efforts. The aim is to create a plan that reflects one's financial priorities and enhances overall financial discipline.