(NewsNation) — Zero-based budgeting, or ZBB, is a financial method that aims to pair each dollar earned with a specific purpose, preventing overspending in certain areas and fully using up your paycheck.

Typically used by companies, the budgeting system encourages you to use every penny of your monthly income — as long as you do it consciously. Here’s how it works.

What is zero-based budgeting?

ZBB is a system that allocates money between necessary expenses, wants, short-term savings, long-term savings and debt payoffs.

By predetermining how each cent you earn will be used, you start each period — classified by your paycheck frequency — with a base of $0.

If you’re under budget for one month, you can always factor that extra cash into your next cycle’s budget or put it away in an emergency fund. But to pull off ZBB, you’ll need to aim for zilch each pay period.

Here’s how it works:

• Know your exact income, even if it takes a few paychecks to evaluate.
• Categorize all your expenses.
• Give each category a budget based on past spending.

Unsure of how much to allot each month? NerdWallet recommends the 50/30/20 rule, which breaks budgets down to needs (50%), wants (30%) and debt or savings (20%).

“If you do your budget and you’re in the negative, that’s a problem, but don’t freak out,”  George Kamel, author of “Breaking Free from Broke,” told The Guardian.

“You’re spending more than you make, which means you need to get out your metaphorical hedge clippers and trim that budget,” Kamel explained.

If you stick to ZBB, money for rent, nights out on the town and paying off a credit card can be easier to tackle, as the entirety of your paycheck is at your disposal.

Zero-based budgeting pros and cons

While it may sound as though you’re living paycheck to paycheck, the strategy ensures all monetary needs are met and helps reach savings goals.

Using the entirety of your income each time you’re paid also makes it easier to prevent overspending — because you won’t necessarily have it on hand.

“If you haven’t tracked where your money is going, or if you feel like you don’t have control of your money or spending, then I think that this is a really good method,” Catherine Hawley, a certified financial planner in Monterey, California, told NerdWallet.

But, for those with more unpredictable payouts, the ZBB method can prove difficult. It’s hard to allot each cent a category when you don’t know when your next payday will come — or how large it will be.

Plus, ZBB takes time. Evaluating your paycheck, deciding how much you’re willing to give each category and holding yourself to it can be exhausting, especially if you tend to make impulse purchases.

It also makes it harder if you have variable expenses, as you’re leaving your checking account scant in favor of paying off debt or saving up.

Which budget is right for me?

Like each person, each budgeting method has its own quirks and flaws. If you’re a chronic overspender, ZBB or the envelope system might force you to evaluate your habits.

For those who don’t want to track every expense right away, the no-budget budget or incremental budgeting may be a good fit.

Maybe you just want to see your savings account grow. The pay-yourself-first budget can help with that.

For more help, NewsNation has compiled a list of budgeting apps you might find useful.