Zero-based budgeting is a method where you assign every pound of your income to a specific purpose — bills, savings, debt, spending and so on — until your income minus all your allocations equals zero. The 'zero' doesn't mean spending everything; saving and paying off debt are jobs you give your money too.
Each month (or each payday), you start with your expected income and 'spend it on paper' before the month begins, deciding in advance where every pound will go. If you earn £2,000, you allocate all £2,000 across categories — rent, food, transport, savings, fun, debt — so that nothing is left unassigned and drifting. When money has a defined job, it's far less likely to leak away on things you can't later account for.
It takes a couple of months to find realistic numbers, so don't be put off early. Doing it on payday and moving savings across straight away works well. Our free payday budget and monthly budget template are built for this, and our budgeting guide covers other methods. This is general information, not financial advice; free help is available from MoneyHelper.