A common misconception is that having a budget prevents you from having fun, but it actually gives you permission to spend.
A budget is a plan for how you will spend your money. It gives you accountability and control over every dollar you earn and spend. Dave recommends using a zero based budget to specify where each dollar goes (before the month starts). In other words, income minus expenses is zero.
Types of budgeting are: Incremental Budgeting. Zero-Based Budgeting (ZBB). Activity Based Budgeting. Participatory Budgeting. Budget negotiations. Budgeting the Value Proposition.
The rule states that up to 50% of after-tax income should be spent on duties that are necessary or must be done. The other half should be split into 20% for savings and debt repayment, and 30% for other necessities.
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