Most of us would love to have no debt, and many people make a conscious effort to get to that point. Debt can be suffocating: it can affect our credit score, stress levels, and, of course, our financial stability. But while most people would rather not have debt, few of us could put a number on how much debt is too much.
So how much is too much debt? Most people would agree that the above number is far too high, but what about personal individual debt? Is it $10,000 in credit card debt? A $100,000 in student loan debt? The answer to that question may be personal and depend on your individual circumstances, but there are certain signs that indicate you probably have too much debt.
1. You’re not sure how much debt you have
It doesn’t matter if you have $3,000 in credit card debt that you can’t pay back or if you have $10,000 that you can’t pay back. While one number is significantly higher than the other, if you don’t know how much debt you have, there’s a good chance you have too much. Even if you don’t have the funds to pay your debt off quickly, you should still pay attention to how much you have.
If you’ve gotten to the point where you either don’t care how much debt you have or if you are just too overwhelmed to keep track, then you may need to get help. Too much debt, especially if you don’t pay it regularly, can significantly affect your credit score. Set time aside to look up all the amounts you owe and what your various interest rates are so that you will know how much you are dealing with.
2. You have no plan for paying your debt
At some point, too much debt might leave you feeling apathetic, like there’s little you can do to change your situation. If you feel like you are drowning in debt and you are regularly missing payments, then you are in trouble. You should have a plan to pay your debt down, whether that plan entails monthly minimum payments, using your tax refund to pay off more debt, talking to the lenders to change your terms, or whatever else you need to do to pay off your debt.
If you don’t have a plan, you probably have too much debt. Debt management should be just that: manageable. If you have been so overwhelmed by your debt in the past that you haven’t stuck to a plan, make one now.
3. You can’t afford your bills
If the bills are coming in and you can’t afford them, your debt has gotten out of hand. While anyone could experience a temporary setback like a job loss, if you’ve been unable to pay your bills regularly for a while, your debt is more than you can handle. Most debt — whether from credit cards, student loans, or a car loan – involves regular monthly payments, and if you are receiving the bills but you can’t pay them, then you need to take steps to reduce your debt.
The same is true if you pay your bills but you often pay them past the due date. Doing so affects your credit score and will also cause your interest payments to increase because you won’t be paying down the principal of your loans as quickly. When it comes to credit cards, if you are only paying the minimum (or less), the rest will carry on to the next cycle and accrue more interest.
4. You’re stressed all the time
Even if you can afford to pay the minimum due each month, you know exactly how much you owe, and you have a plan for paying it off, if you are constantly stressed due to financial worries caused by the amount of debt you have, then you have too much debt. While some debt is reasonable, if it gets to a point where you are thinking about it constantly and it is affecting your daily life — your relationships with other people, your health or sleeping habits, or your job – then you have too much debt.
This sign is a less obvious than the others, because separate people will react differently to stress. However, when your debt is on your mind regularly and it makes you fearful or depressed, then the problem is too big, and you need to get help or pay your debt as soon as possible. Even a $1,000 credit card debt is too much if it is negatively affecting your life.
5. You have nothing left
One of the worst decisions you could make would be to regularly use a credit card to pay for the debt on another credit card or other debt. If you get to the point where you have to do this monthly (or even every few months), then your debt situation is way too out of hand. Yes, if you have to use a credit card to pay for the balance on another card with higher interest once in a while, that is fine, but if you make a habit of it, you will be putting yourself in even bigger financial danger because you will be participating in a dangerous cycle.
Also, if you are regularly borrowing money from other people in order to pay your bills, you can’t live like that forever. Another similar sign is that if you have used all your savings and you don’t have an emergency fund, then you definitely have too much debt. Lastly, if you don’t have any money left to buy necessities and pay your utilities, you clearly have too much debt. While there is no specific number that can be said to be too much debt (because it depends on the individual person’s finances), if you are experiencing several of the above signs, you probably need to reevaluate your debt situation.