Understanding "Zero-Based Budgeting", a Method to Allocate Money Down to Zero

JAKARTA, KOMPAS.com – Methods for managing personal finances continue to evolve alongside the growing need of society to regulate spending more disciplinedly. One increasingly popular approach is zero-based budgeting (ZBB), which emphasises allocating the entire income until nothing is left at the end of the period. This concept was initially used in the business world but is now adopted by many individuals to manage household finances and increase savings. Citing NerdWallet on Saturday (28/3/2026), in zero-based budgeting, income minus expenses must equal zero. A similar definition is provided by PayPal. In its explanation, PayPal describes zero-based budgeting as a way to create a budget where every expense must be justified for each new period, starting from zero. “That means that every month, income minus expenses must equal zero,” said PayPal, quoted from Mirror. In other words, all received money must have a clear purpose. No funds are left without allocation. The Telegraph in its report also states that this method assigns every portion of income and expenses to a category. In practice, zero-based budgeting begins by recording all sources of income in one period, usually monthly. Each expense category is designed so that its total equals the amount of income. If there is still remaining funds, they must be reallocated, for example, to increase savings or investments. Conversely, if expenses exceed income, adjustments are needed by reducing certain items. This method also emphasises the importance of routinely monitoring expenses. Every transaction is recorded to stay in line with the initial plan.