What Is Zero-Based Budgeting?

The article explains how zero-based budgeting helps people assign every dollar of income to a specific purpose, while outlining when the approach is most effective and the challenges some households may face in maintaining it.

Key Takeaways:

• Zero-based budgeting requires assigning every dollar of income to spending, saving, investing, or debt repayment so that no income remains unallocated.
• The method can help improve financial organization and reduce overspending, but it requires regular monitoring and adjustments when expenses change.
• WalletHub's panel of experts, including Dave Harr, discusses who benefits most from zero-based budgeting, who may struggle with the approach, and strategies for making it successful.

"Get started. Begin with major items such as housing, food, transportation, savings, debt, and entertainment. Include items such as car repairs, gifts, vacations, insurance, and medical costs so they do not become 'surprises.' Also be sure to include 'fun' money. A plan that allows no flexibility is difficult to sustain," says Professor Harr. 

Read the full article.