What is debt? What is a deficit?
What is debt? What is a deficit? Do the two words mean the same? We often hear the two used wrongly and completely out of context. In simple terms, we can explain the differences in this way. A deficit is the amount by which a sum of money falls short of the required or expected amount – a shortage. For example, if you have a monthly spending budget that equals your monthly cash inflow, then you are within budget and have no deficit. However, if your spending exceeds your cash income, then you end with a deficit equal to the amount of the excess spending. The government annual budget deficit is the difference between the amount of money the government spends and the amount it collects.
In the previous example, if you continue deficit spending, the accumulated deficit becomes your debt. This debt, of course, is in addition to all other debt you may have. Debt is an obligation or liability to pay or render something to someone else. It is something owed, such as money, goods, or services. Does debt really matter? Does it affect our lifestyles and us? Why should we be interested in becoming debt free?
Tell me about “your†debt challenges! Your comments appreciated!
Content © Rich Brott, 2011
