What does a deficit indicate in personal finance?

A deficit in personal finance signifies that an individual's expenses exceed their income over a certain period. When the amount spent is more than what has been collected as income, it typically leads to borrowing or taking from savings to cover the gap. Understanding this concept is crucial for managing finances responsibly, as consistently operating at a deficit can result in growing debts and financial instability. In contrast, scenarios where the amount spent is less than or equal to the income collected represent better financial health, focusing on saving or balanced budgets instead.