A zero-based budget is a budgeting method where you allocate every dollar of your income to specific expenses, savings, or debt payments so that your income minus your expenditures equals zero by the end of the budgeting period. This means every cent has a purposeful job, including necessities, wants, savings goals, debt paydown, and even fun expenses. Unlike traditional budgeting, which often adjusts previous budgets incrementally, zero-based budgeting starts from scratch (a "zero base") each period, requiring justification for all expenses, both old and new. This method helps ensure all financial needs are met while giving you control over where your money goes and preventing unnecessary spending. It can be used by individuals, families, or organizations to promote fiscal responsibility and cost management. It was developed in the late 1960s by Peter Pyhrr, a former Texas Instruments account manager. In summary, zero-based budgeting means starting with zero and giving every dollar a specific purpose, aiming for your total income to exactly match your total expenditures for the period.
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