Budget surpluses occur when a household or business generate income that is above and beyond the projected revenue for a given period. Surpluses are the opposite of budget deficits that occur when there is not enough income to cover the budget for the period cited. When determining the best ways to make use of a budget surplus, it is important to prioritize those potential uses, project the possible outcomes, and make decisions that will ultimately enhance the overall financial well-being of the household or company involved.
After identifying the amount of the budget surplus, the task will often focusing on brainstorming how to make the best use of that extra money. Within the home, this may call for a family conference that allows each member of the household to provide some ideas for possible uses. In a business setting, the process will often involve discussions between owners and managers to determine how the funds can be spent and benefit the company in some tangible or intangible manner. Collecting several ideas for consideration helps to inspire participants to think seriously about what to do with the budget surplus and have something to show for it later on.
Once several ideas of how to spend the budget surplus are secured, it is important to qualify those ideas. This can be accomplished by determining how much each idea will cost and if there is enough of a surplus to fully complete the task. Depending on the range of ideas presented, it may be possible to select a couple of ideas for serious consideration, if it appears that the budget surplus is sufficient to manage multiple options.
A final step involves projecting how the use of the budget surplus will provide benefits to the household or company. Doing so helps to provide a snapshot of how the finances will stand once the surplus is allocated to one of more suggested options. This helps to provide a better understanding of the long-term ramifications of spending the surplus in certain ways, which in turn makes it easier for a few specific strategies to stand out from the rest.
Two of the most common ideas on how to spend a budget surplus involve paying debt that is currently outstanding, or placing all or a portion of the budget surplus into savings. Both ideas are worthy of consideration and would certainly aid in improving the present financial situation of a household or a company. For example, a business may choose to allocate a portion of the surplus to a contingency fund that will help offset a deficit in a later economic period. Another portion may be used to retire a specific debt, a move that frees up income in subsequent periods. The remaining portion of the surplus could be used to purchase something for the company that will enhance the operation in some manner, or perhaps provide an additional amenity for the employees.
