Zero-Based Budget
A budgeting method where every dollar of income is assigned a job (expenses, savings, or debt). At the end of the month, income minus allocated amounts = zero. YNAB uses this method.
Zero-based budgeting means allocating every dollar of your income to a specific purpose before you spend it. Income minus all allocations equals exactly zero — hence the name.
For example, if you earn $4,000 per month, you might allocate $1,400 to rent, $600 to groceries, $400 to transport, $200 to insurance, $400 to savings, $300 to entertainment, and so on until every dollar has a job.
YNAB (You Need A Budget) is the most well-known app using this method. It's effective but requires discipline — you need to categorise every purchase and adjust allocations when you overspend in a category.
Why this matters
Zero-based budgeting is powerful for people who want maximum control over their money. However, it requires significant effort to maintain. If you find traditional budgeting too rigid, tools like Steady take a different approach — automatically tracking your spending and showing you your safe-to-spend amount without requiring you to pre-allocate every dollar.
Related Budgeting terms
Safe to Spend
Your available balance minus upcoming bills and savings commitments. It's the amount you can actually spend without going into the red. Steady shows this number on your dashboard.
50/30/20 Rule
A budgeting guideline: 50% of income on needs (rent, food, bills), 30% on wants (dining out, entertainment), 20% on savings and debt repayment.
Emergency Fund
Savings set aside for unexpected expenses — car repairs, medical bills, job loss. Most experts recommend 3-6 months of living expenses. Keep it in an on-call savings account for instant access.
Sinking Fund
Money set aside for a planned future expense — holiday, Christmas gifts, car registration. Unlike an emergency fund (for surprises), a sinking fund is for things you know are coming.
Put this knowledge to work
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