A budget surplus occurs when income is greater than spending. When people, organizations, or governments have a budget surplus, this means that they have extra funds which can be used to do things like retiring debt. Governments often release information about their budget for the benefit of interested members of the public, and it is possible to find charts which show government surplus over time.
The opposite of a budget surplus is a budget deficit, and most people, organizations, and governments actually run at a deficit, not a surplus. This is because it is often necessary to go into debt to finance activities which will lead to improvements. The trick with deficits and surpluses is to make sure that servicing interest on debts does not become such a heavy burden that the budget is unable to support it. The task of organizing a budget to allow for the management of debts and expenses is known as balancing the budget.
When a budget surplus arises, there are a number of ways it can be dealt with. In households, the decision to save the extra money may be made, under the argument that it can provide a financial buffer in case someone loses a job or unexpected expenses arise. A budget surplus can also be used to pay down the principal on the debt in order to reduce interest payments. People may also opt to utilize the surplus to finance purchases which have been delayed or considered optional; for example, a school budget surplus might result in the decision to buy new science equipment.
Being in a state of budget surplus is often viewed as positive, and in the case of governments, as a sign that the economy is healthy and the government is being run well. Some governments reward citizens in times of surplus by lowering tax rates, although this has been shown to be problematic because it can be difficult to balance the budget later. Others may use surpluses to reinvest in people and communities.
People should be aware that numbers about the budget can be and sometimes are manipulated to push particular political, economic, or social agendas. Estimates of surpluses and deficits can sometimes vary widely because people use different rubrics to arrive at the numbers. When someone quotes a number, it is advisable to ask about the source and the methods used to arrive at that number, rather than accepting it at face value.
