1.4.3 Surplus or deficit?

Is the difference between your total monthly income and total monthly expenses a positive or a negative figure? If it is positive, you have a surplus. If it is negative, you have a deficit.

Definitions

• Surplus: the amount by which your income is greater than your spending
• Deficit: the amount by which your spending is greater than your income

If you have a surplus, congratulations! Here are some ideas for what you can do with the extra money:

• pay down debt (especially high-interest debt, like credit card debt)
• boost your emergency fund
• increase your monthly savings amount
• invest some of the surplus to pay for future expenses like your children's education or your retirement.

If you have a deficit, you need to make changes to balance your budget and get back to the plus side. You can:

• take a look at your discretionary spending and cut back
• reduce expenses by negotiating better plans for your communications, banking and other services—contact your service providers to see if you can get better rates
• increase your income, possibly by getting a different job or an additional job.