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What Is a Budget Surplus?

When the income is higher than expenses, a budget surplus occurs. This simply means that there is more money left over for other things after all other necessary expenses have been dealt with. An individual, a corporation, or a government can have a budget surplus. As having money left over is a positive thing, it is a common practice for businesses and governments to make a big deal about a budget surplus. This is often announced publicly, and indeed, practically anyone can look into the history of an entity’s budget surplus.

When there is a budget surplus, the money left over can be used for a variety of purposes. One common way to deal with surplus income is to use it to pay off debts. This is particularly significant if the surplus consists of a considerable amount. The money can be used to make a huge dent on one’s existing debt. This, in turn, can result in lower interest rates and a shorter repayment period.

Another option is to use the surplus money to further make money; that is, investments can be made. This is the smart option when one does not have debt to deal with. For individuals, having extra money at their disposal can also mean finally buying things that they have been putting off for quite some time.

The opposite of a budget surplus is a budget deficit. In this case, the expenses of an individual or a business entity exceed the income, resulting in debt. The sad thing is that budget deficits are more common the surpluses.

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