What is a budget surplus?

A budget surplus occurs when an individual's or organization’s income exceeds its expenses during a given period. This surplus indicates that the entity has generated more revenue than needed to cover its costs, allowing for various positive uses of the excess funds. For example, the surplus can be allocated to savings, investments, or paying down debt.

Understanding the concept of a budget surplus is crucial for effective financial planning and management, as it solidifies the importance of maintaining greater income over expenses as a foundation for financial health and stability. This contrasts with a situation where expenses exceed income, which can lead to debt and financial strain. It is also distinct from methods or strategies that focus on tracking or adjusting spending, as those pertain more to budgeting processes rather than outcomes like a surplus.