How Do You Know If You Have Too Much Debt?

Believe it or not, you would typically know right away if you have too much debt, not only by the number of sleepless nights you would have to endure but also the endless and sometimes relentless phone calls that bill collectors might harass you with. If these situations don’t sound familiar, you can still tell you have too much debt through a miscellany of signs, including not knowing how much you owe, paying bills late, borrowing to pay bills, losing sleep over your financial situation, and turning to controlled substances to escape the stress of debt.

Do I know How Much I Owe?

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Not knowing how much you owe is an early sign of potential debt trouble because not only does that entails not knowing how much interest you’re paying overall, it also means that you may not be receiving all lender bills and making payments on time. If you find yourself answering a phone call from a lender whom you can’t recall owing to, it may be time to take a step back and figure out the best way to gather all your debt information. A good starting point is your credit history, which normally would include all your debt data.

Do I Pay My Bills Late?

If you have difficulty paying your bills on time, you may have too much debt and need to find a way to consolidate, settle or pay off that liability. Do it as promptly as you can because a late bill payment not only lowers your credit score, it also causes your lenders to increase your annual percentage rate.

Am I Constantly Borrowing to Pay Bills?

Incurring a new debt to pay off an existing liability is a clear sign of financial mismanagement and economic trouble. You know you are in debt trouble if you have to barnstorm the offices and homes of groups as varied as lenders, relatives, and friends before paying your monthly bills.

Have Collection Agencies Now Memorized My Phone Number?

If bill collectors think you’re a person of interest, it may be time to find tangible ways to reduce your debts. Don’t forget to ask the bill collectors proof that you owe the debt, ask them to verify the debt, and make sure they send you a written confirmation of whatever agreement you may have reached with them over the phone.

Do I Lose Sleep Over My Finances?

If you can’t sleep at night because of money trouble, chances are you have too much debt or are in financial straits. helps you figure out whether you are highly indebted by simulating your monthly after-tax income, monthly mortgage payment, and total outstanding balance on consumer debts.

Have I Drained All My Savings?

You probably have too much debt if your savings account shows a zero balance. This is especially true if you use your savings, as well as whatever nest egg you possess, to pay off existing debts.

Have I Turned to Drugs and Alcohol to Escape the Stress of Debt?

Too much debt often produces a pernicious effect on borrowers, and if you find yourself coping with alcoholism and drug addiction, you might want to reconsider your financial options. If you constantly stress over money and debt, then you know you have a debt problem and must start figuring out the best way to fix the problem.

How Do I Maintain a Safe Debt-to-Income Ratio?

The debt-to-income ratio equals your total monthly debt payments divided by your monthly after-tax income. I recommend a debt-to-income ratio of less than 50%, meaning a borrower with a reasonable metric should not spend more than half of his or her income on debt service. To maintain a safe debt-to-income ratio, reduce your expenses or increase your income. Start with cuts in non-noticeable areas in your budget, such as the third Friday night movie session you hold every month but don’t really need. Then move on to more noticeable cuts like reducing the kids’ music lesson hours, eating out less frequently, and gradually stop buying those pricey organic foods.

How Do I Create a Spending Plan, and Stick to It?

You can create a spending plan to fix whatever debt problem you have and pay off your loans over time. Draw two columns, one with income items and the other indicating expenses. List all your monthly expenses and compare them with your income, giving you a percentage result – 45% debt-income ratio, for example. If you think the percentage is satisfactory, start implementing the budget plan and closely monitor your spending. Keep receipts, track all expenses during the month, compare actual results versus planned expenses at month-end, and make the necessary adjustments to reach your goal.


If you are struggling with debt, consolidation might be an option. However, you should attempt to eliminate debts on your own first. Knowing that you have too much debt is one thing, but taking specific steps to gradually pay off the liabilities is another. You can tell that you’re over-indebted through a pastiche of factors, including maxing out credit cards, borrowing to pay bills and not sleeping over your finances. You can fix your high indebtedness by forging and sticking to a spending plan, making sure it fits with your lifestyle, debt-to-income ratio, and spending habits.

Steven Millstein

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