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Debt can be debilitating if ignored, but all too often, unpaid bills easily pile up. How can you tell if you have too much debt and what can you do about it?
It’s no secret that Americans are racking up more and more debt. In fact, did you know that Gen Z and younger millennials (ages 18-24) have, on average, $22,000 in debt?

That’s not a way to start out your working years.

But sometimes it’s hard to recognize the warning signs. Sometimes you need to stop and go through a few self-reflection questions to see if your debt is really too much for you to handle.

In this article, I’ll cover eight different ways to find out if you have too much debt. Let’s start with the questions to ask yourself.

Ask Yourself These 8 Questions to Find Out If You Have Too Much Debt

A quick way to determine if you have too much debt is by simply exploring the eight questions below:

1. How High is Your Debt-to-Income Ratio?

This is the question you ask before your debt gets out of hand. It’s a personal finance measure that a lot of people don’t bother with.

But lenders calculate your debt-to-income ratio to see if you’re a safe borrower or not. If you keep your debt-to-income ratio in check, you’ll know when you’re financially safe and when you have too much debt.

To find this ratio, you simply need to divide your total monthly debt payments by your gross monthly income.

Your monthly debt payments will include your mortgage, credit cards, and other outstanding loans. Gross income is your monthly income before taxes and other deductions.

Using these two values, you’ll get a number (or a percentage if you take the time to multiply it by 100), which should ideally be under 20%.

When I worked as a credit analyst for a major bank, we looked at 30% as the threshold for most borrowers. Once you cross 30% in debt-to-income, it typically indicates you have too much debt that may hinder your payments when taking on additional debt.

Remember, though, this is more of an art than a science. So different lenders and industries may be more or less comfortable with certain ratios. Which leads me to the mortgage industry.

In general, the debt-to-income ratio limit to qualify for a mortgage is 43%. If you cross that limit, you won’t qualify for a mortgage in most cases.

This number also shows that you are nearing “too much debt.” If you ask me, though, this number is way too high.

2. Are You Paying Your Bills On Time?

When your debt gets too high, your income will seem to disappear as soon as it appears in your bank account.

You’ll be paying your mortgage, student loan, and credit cards; and just like that, you barely have any money left for necessities.

When that happens, it’s possible to end up inadvertently skipping your utility bills. Or you might be paying them late.

This is ultimately worse because, in your already bad financial condition, you’ll be incurring late penalties. So when your bill payments start getting late, you’ll know that you’re in the danger zone of debt.

Also, if you’re borrowing money to pay bills, you’re just making things even harder for the future. One quick solution to this is to make a bare-bones budget. This will help you at least start to get back on track.

3. Are Your Necessities Adding to Your Debt?

Victims of more-debt-than-you-can-handle are your necessities. If you are struggling to put food on the table, it could mean you have crushing debt.

But even before the food shortage, there will be tell-tale signs.

Postponing medical appointments like the dentist, putting off taking your car to the mechanic because you owe him or her money, or straining to cover your most basic expenses are all signs that you’re in trouble.

With a healthy debt ratio, both your needs and wants should be covered well within your income. Paying off routine debts should simply be a part of your monthly expenses.

One point I want to make clear, though. When you think about necessities, this doesn’t mean Netflix, Spotify, a gym membership, or random stuff through Amazon. Those aren’t necessities–those are wants.

If you need some help really narrowing it down, check out this article of a girl who did a spending fast to get herself out of debt. That’ll help reel you in on what’s a necessity and what’s not.

4. What’s Your Relationship with Your Credit Card?

People with bad financial habits take an even worse turn when the debt gets too high. If you’re relying on your credit card to pay your bills and buy food, it means your debt has become too heavy to carry.

Even if your credit cards are temporarily solving your problem, they are making things harder for you in the long run.

You might get by for a few months with making minimum credit payments. But the debt you have accumulated is constantly growing, thanks to interest.

Soon, you won’t be financially stable enough to be pre-approved for a new credit card.

Credit cards are unsecured debt since an underlying asset does not back them. This translates to an amazingly massive interest rate.

The longer you keep using your credit cards to temporarily bail yourself out of tough financial conditions, the heavier your debt becomes.

5. Do You Have Any Savings (Left)?

The answer would probably be no if you have too much debt. Savings are usually the first victim of financial upheaval.

Because that’s what savings are for, right?


If you start tapping into your savings account the moment your debt-to-income ratio gets out of hand, you’ll doom yourself. The true hell of too much debt is not unleashed until much later.

Savings are for those desperate times.

If you’re constantly reaching out to your savings account to simply get by, that means you already have too much debt.

And when you don’t have any savings, it doesn’t just mean that you don’t have a nest egg. It also means you are not growing your wealth by any means (through savings accounts or investments).

Although it may seem like a crazy idea now if you’re in financial trouble, you should aim to have at least three to six months of monthly expenses set aside in an emergency savings account.

And remember, this isn’t to help you get by with things you want, but more to help you survive when things get really bad (i.e., job loss).

6. What’s Your Credit Score?

Your credit score is another indicator of having too much debt. It’s calculated primarily on the basis of your debt and payment history, without factoring in your income.

You’re eligible to get one free credit report a year from each of the three credit reporting agencies (so three total). It’s a good idea to get these once a year and read through it thoroughly.

Alternatively, you can use a service like Credit Karma or Credit Sesame, which will keep you up to date on your credit score all the time, as well as make recommendations on how to improve.

A good credit score makes you an attractive borrower, just like a good debt-to-income ratio. But even if you aren’t borrowing, knowing your credit score might give you a good, if somewhat brutal, picture of your debt crises.

Your credit reports are usually very thorough. They help you find out what’s dragging down your score.

They also help you figure out your most toxic debts and your financial weaknesses. Aiming for a higher credit score and making relevant changes in your life is a good way to stay ahead of your debt.

Related: If you’re looking for an easy way to increase your score, sign up for Experian Boost™. This service is free and can see when you make your monthly payments like your utility bill and cell phone bill on time. When you do, your credit score will get a boost.
Learn More: Read our Experian Boost Review

To get started, read our guide on how to improve your credit score.

7. Do You Have Debt Collectors Knocking On Your Door?

That’s not so much an indicator of too much debt, as it is a blaring siren. When you become too indebted and have too many outstanding delinquent payments, your lenders tend to cut their losses. They sell your debt to debt collectors.

These debt collectors will contact you and try to “persuade” you to repay your delinquent payments. When that fails, they report your delinquent payments to credit bureaus. This really kills your credit score and stays in your credit history for years.

Worst case scenario, they go to court. We hope you realize your debt problems way before that and start managing your finances efficiently.

8. Can You Afford Insurance?

Every sane person keeps up-to-date with their insurance premiums, especially medical insurance. Because no matter how much it seems like a drain on your limited income, it will be exponentially worse if you are forced to pay medical bills out of your own pocket.

But if your debt really gets too high, you might stop paying your insurance premium. We are not saying it can’t get worse than that, but if you stop paying your insurance, know that you have truly hit rock bottom.

Regardless of your financial insurance, I would ALWAYS recommend you have health insurance, life insurance, car insurance, and homeowners or renters insurance. It’s a really poor financial move to avoid having those protections.

Remedy the Situation

The stark reality is that there is no easy fix for too much debt. But that’s not to say there isn’t a way out.

There is always a way out. But that requires serious planning, major life changes, and lots of discipline.

The very first thing you have to do is stop increasing your debt. Like Will Rogers said,

“If you find yourself in a hole, the first thing to do is stop digging.” 

That means that the first thing you have to try and pay off is your credit cards.

How will you do that when your debt pay-offs have already out-paced your income? There are two traditional methods:

  1. Increasing your income
  2. Cutting down on your expenses

Increasing your income might be easier said than done, but remember that every little bit helps. Working too hard for a while may be worth it if it means getting yourself out of crushing debt.

The sooner you are on the right side of your debt, the better.

Cutting expenses requires discipline. It also requires planning and taking a good look at your routine expenditures.

Make a list of your expenses; see where you can cut back. You might find unnecessary expenses: two separate Netflix accounts, expensive cable premium, too many takeout meals, etc.

These are just a few examples of how you can start saving money by cutting some unnecessary luxuries out of your daily life. You should remind yourself that it won’t always be this way.

Once your debt-to-income balance is restored, you can go back to spending money the way you did before (only this time, use a budget and be smart).

Also, start saving right now. It might not seem like a viable option when you are struggling to get by because of your enormous debt, but it helps even if you are saving a minimal amount in the beginning.

Saving will not just help you build or rebuild a nest egg for bad times; it will also help with your bad spending habits.

Bottom Line

Debt is a reality you’ll have to face. The ideal scenario is that you stay ahead of your debts and aim towards paying them off as soon as you can. It might not be the case with long-term debts like mortgages, but paying off credit cards as soon as possible is important.

Apart from torpedoing your finances, too much debt has the potential of putting a serious strain on your mental health and your family’s happiness. With a few timely measures, financial discipline, and understanding your debt, you can stop the situation from getting out of control.

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