In the Red or In the Black

In the red/in the black summary:

• When you're in the red, you're spending more money than you're earning.

• When you're in the black, you're earning more than you're spending.

• Following a budget and trimming expenses could help you go from being in the red to being in the black.

In the red/in the black definition and meaning

The terms in the red and in the black can be used to describe both an individual's personal finances and a business's finances. Being in the red means you're spending more money each month than what you bring home in your paycheck. Being in the black means you're not spending your entire paycheck each month, and that your income exceeds your expenses.

Key concept: A key sign of financial health is being in the black, rather than in the red. 

Comprehensive breakdown of in the red/in the black

A company that's in the red is operating a loss. Sometimes, it can take a while for a new business to go from being in the red to being in the black. 

A person who's in the red is spending more money than what they're paid. You may have a month when you end up in the red because of larger bills, or, if you’re self-employed, because it was a slow month income-wise. A person who's consistently in the red month after month risks becoming overwhelmed by debt. 

On the other hand, if you're in the black, it means you're earning more than what you're spending. You have money left over at the end of each month and you haven't taken on too many expenses or debts.

If you've been in the red for a long time due to unsecured debt and don't see a path toward getting into the black, it could be worthwhile to talk to a debt relief company. If you're in the red but can see a path out of it, you may be able to take steps on your own to get into the black. These could include:

• Following a budget

• Reducing expenses

• Consolidating your debt at a lower interest rate to reduce your monthly payments

• Boosting your income with a better-paying job, overtime pay, or a side hustle

Example of being in the red and in the black

If your recurring monthly expenses total $5,000 and your take-home pay each month is $4,500, it means you're in the red. You're spending more than what you earn and should try your best to break that cycle before you end up with an overwhelming amount of debt.

If your recurring monthly expenses total $5,000 and your take-home pay each month is $5,500, you're in the black. Your income exceeds your spending, and you have an opportunity to save money left over every month. You're also in a strong position to cope with unexpected expenses since you're not spending your entire paycheck.