Hi,
There are several ways to create a real time clock.
You can use an external clock chip like the DS1307 or use timer0 as you say, though 4mhz does not divide neatly down to 1 second, but if you see Roman Blacks Zero Error 1 second clock in this forum it can be done.
Timer 1 is also designed for a cheap 32k watch crystal to be attached to act as 1 second timer, I have used this on many projects, see the datasheet for details.
Also mention what programming language you are using