How do you know if you have too much debt?

Whether or not you have too much debt is not always easily determined. However, there are certain signs that indicate that you are indeed experiencing some major financial trouble. It is important to be able to recognize these signs and to watch out for them in order to avoid the severest forms of financial trouble- bankruptcy and foreclosure.

Assess your financial situation

Recognizing that you have too much debt begins with the ability to focus on how much money is coming in (salary, rental income, etc.) as well as how much money is going out (mortgage, car loans, bills, donations, tuition, etc.). If you are paying out more money than you are bringing home, then you definitely have too much debt.

Look at each one of the following circumstances and determine whether or not they apply to you. If they do, then you are seeing some warning signs that the amount of debt that you carry each month is simply too much for your income bracket.

• The inability to make all of your bill payments on time in a particular month or during more than one month
• Paying additional bank charges due to insufficient funds in your account
• The need to borrow money from friends, family, or coworkers in order to pay off one or more of your monthly bills
• The need to take out a payday loan in order to pay a monthly debt
• Paying only the minimum amount due each month on one or more bills
• Never paying a credit card off in full
• Receiving more than one late fee in a month or receiving late fees for one account each month
• A reduction in funds in your savings or the total depletion of any emergency fund or savings

Additional Signs That You Have Too Much Debt

In addition to the inability to pay your bills on time, the need to borrow money, and extra charges and fees, you may also notice a few less tangible signs that you do have more debt than you can handle.

People who have more debt than they can reasonably handle often come to the realization that they have too much debt simply by worrying about the fact that they have too many bills. Initially, they might not even realize that the real problem is that they spend too much money, leading to too much debt. If you find yourself dwelling on the fact that the bills seem to stack up rather quickly each month and worrying over how you are going to pay them all, chances are you have too much debt.

Life insurance and homeowner’s insurance are also two of the common household expenses that families or individuals will cut out of the picture if they begin to struggle to pay the bills each month. Unfortunately, this might mean that they get to continue purchasing designer clothes and/or expensive electronics even though they could be left with nothing if the unexpected happens.

Of course, other signs that an individual is carrying include not having any cash in your pockets between paychecks, and rushing to the bank to cover a check that you have written. You should learn to recognize the signs that you have too much debt so that you can prepare to take steps to adjust your level of spending.