A deficit occurs when you spend more than you have or produce less than you need. If you earn ten dollars but spend fifteen, you have a five-dollar deficit. If a soccer team needs three goals to tie but only scores one, they have a two-goal deficit.

The word appears most often in discussions of money and government budgets. When a government runs a budget deficit, it spends more money than it collects in taxes, forcing it to borrow the difference. A country might run deficits during wars or emergencies, planning to pay back the borrowed money later. Over time, these deficits add up to create debt, which means money that is owed and must eventually be repaid.

You might also hear about other kinds of deficits. A trade deficit happens when a country buys more goods from other countries than it sells to them. Doctors sometimes talk about nutritional deficits when someone doesn't get enough vitamins or minerals. A student facing a sleep deficit hasn't gotten enough rest over several nights.

The opposite of a deficit is a surplus, when you have more than you need or produce more than you use. Understanding deficits helps you think about budgets, whether you're managing your allowance or understanding how governments and businesses make financial decisions.