What is the key rule of a zero-based budget?

• A. There should be zero leftover after allocating funds.
• B. There should always be leftover to spend on leisure.
• C. Leftover funds should be invested in high-risk assets.
• D. Leftover funds should be kept as unallocated cash.

Answer: (A)

Zero-based budgeting means you give every dollar a job. You allocate your entire income across categories—rent, groceries, debt payments, savings, investments, and even small purchases—so that the total allocations equal the income. The essential rule is that there should be zero leftover unallocated cash after you finish the budget. When every dollar has a destination, your spending is purposeful and aligned with your goals, leaving no funds wandering without a plan.

This approach isn’t about leaving money aside for leisure or automatically investing leftovers in high-risk assets. Those decisions come from how you assign dollars in the plan. Keeping unallocated cash would break the method's core idea of fully accounting for every dollar.