6 Signs Debt Is Taking Over Your Life
Feeling like you have little money left after paying bills? Well, you are not alone. This has become an increasing problem for many since COVID hit. According to a recent survey, 63% of Americans say they’re living paycheck to paycheck since the COVID-19 pandemic hit. According to the same survey by Highland Solutions, 42% of Americans have taken on more debt than they normally would. Debt for many isn’t going away so we’ve gathered a few indicators that can help you determine if it’s taking over your life.
1. You’re finding it difficult to make your minimum monthly payments
If you are having a hard time scraping together enough money to pay the minimum amount due across your accounts, it could be an indication that your debt is out of control. Keep in mind, only making the minimum monthly payments will result in more interest paid over time. This will also result in you remaining in debt for longer.
2. You can’t keep track of who you owe & your debt grows each month
Do you have too many people you owe money to? Keeping track of all your debt accounts can be quite the task. If you are finding it hard to keep your debt accounts straight, it may be a good idea to consider consolidating all of your debt into one personal loan. (This idea will be covered in-depth later.) Additionally, does it seem like every time you get your bill, the amount you owe increases? If your debt seems to increase every month, getting out of debt may seem like an impossible task.
3. You start missing payments
If you start to skip out on paying certain bills every month, it is a good indication that your debt has gotten out of control. Not paying your bills on time, every time can have a negative impact on your credit score, which could result in being denied financing in the future. In addition, paying your bill late may result in a late fee, which only adds to your debt. If you find yourself borrowing money to pay your bills, raise a red flag. You should not take on more debt to pay off your current debt.
4. Your debt keeps you up at night/you feel hopeless
If your debt is keeping you up at night, or if you are feeling hopeless when it comes to getting out of debt, it’s a good indication that it has taken over your life. If you are unable to clear your mind of your debt, it is time to make a positive change so you can worry less about your finances, and focus more on the things that make you happy.
5. You have stopped saving
Most experts will advise having at least six months of savings available to you in an emergency fund, however; 56% of working Americans say they are only able to save $100 or less each month. Not having an emergency fund available to you in the face of an unexpected event could put you in a stressful and financially troubling situation. While there are some months you may not be able to save much from your paycheck, if you consistently are unable to save, it’s time to reevaluate your debt and create a plan to get out.
6. Debt collectors are calling & your credit score is suffering
Have you started to get those annoying calls from debt collectors? If you answered yes to this question, it is time to formulate a plan to reduce your debt. Not doing so could not only put more strain on your finances, but it could also cause your credit score to plummet. Not paying your bills and incurring too much debt is detrimental to your credit score. Your credit score is a major factor financial institutions use in order to determine your creditworthiness. Having a poor score can drastically decrease your chances of getting approved for financing, and could affect other aspects of your life, such as your ability to get a certain job, rent a car, or move into an apartment. If your credit score has taken a plunge since you took on debt, it’s time to make a positive change.
FAQs
1. A sudden change in payment habits.
What is considered excessive debt? ›
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
Which of the following are warning signs that debt has become a problem? ›
One of the primary warning signs of a debt problem is a steadily increasing balance on credit cards. If you find yourself consistently relying on credit cards to cover everyday expenses or if your balances are growing each month despite making minimum payments, it may be a sign that you're living beyond your means.
Why are four warning signs you have too much debt? ›
Warning signs your debt could be a problem
Not remembering how much you owe and to who off the top of your head. Borrowing money to make payments on other debts. Relying on credit cards to make everyday purchases. Making only the minimum payment due on your cards.
How much credit card debt does the average American household have? ›
What is the average credit card debt in the U.S.? Based on data from the Federal Reserve Bank of New York and the U.S. Census Bureau (based on 2024 and 2023 data respectively), it can be calculated that each American household carries an average of around $8,674 in credit card debt in a year.
How do the rich use debt to get richer? ›
Wealthy family borrows against its assets' growing value and uses the newly available cash to live off or invest in other assets, like rental properties. The family does NOT owe taxes on its asset-leveraged loans because the government doesn't tax borrowed money.
Is $20,000 a lot of debt? ›
U.S. consumers carry $6,501 in credit card debt on average, according to Experian data, but if your balance is much higher—say, $20,000 or beyond—you may feel hopeless. Paying off a high credit card balance can be a daunting task, but it is possible.
Is $5000 in credit card debt a lot? ›
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt.
What is considered toxic debt? ›
Toxic debt refers to debts that are unlikely to be paid back in part or in full, and therefore are at high risk of default. These loans are toxic to the lender since chances for recovery of funds are small and will likely have to be written off as a loss.
When should I worry about debt? ›
It could be time to get help with your debt if you are: regularly worrying about money. struggling to pay your household bills or paying them with credit. relying on your overdraft or credit card to get by.
You can get your free credit report from Annual Credit Report. That is the only free place to get your report. You can get it online: AnnualCreditReport.com, or by phone: 1-877-322-8228. You get one free report from each credit reporting company every year.
What types of debts would you be worried about? ›
Generally speaking, try to minimize or avoid debt that is high cost and isn't tax-deductible, such as credit cards and some auto loans. High interest rates will cost you over time. Credit cards are convenient and can be helpful as long as you pay them off every month and aren't accruing interest.
What is a crippling debt? ›
crippling debt n
figurative (owing too much money)
How much debt is normal? ›
Average household debt in 2024
As of the third quarter of 2023, the average American held $104,215 in debt, according to Experian. Keep in mind that while this number might seem staggering, it's an average — some consumers carry more or less than this amount of debt.
What is considered a large amount of debt? ›
Most lenders say a DTI of 36% is acceptable, but they want to lend you money, so they're willing to cut some slack. Many financial advisors say a DTI higher than 35% means you have too much debt. Others stretch the boundaries up to the 49% mark.
What is the number 1 cause of debt? ›
Health Care Costs Number One Cause of Bankruptcy for American Families. The cost of health care is a major concern for nearly all Americans and there is no shortage of health care related news coverage recently.
What is an indicator of debt? ›
The most generally used and common indicator is the debt-to-GDP ratio. It is. calculated by dividing the total public debt outstanding at a point in time by the. country's GDP. It measures the indebtedness level relative to the country's economic.
How do you identify bad debt? ›
One of the most common signs of bad debt is overdue accounts receivable, when customers fail to pay their bills on time, it can lead to cashflow problems for your business.
Which of the following is the most common cause of bad debt? ›
Bad debts end up as such because the debtor can't pay or refuses to pay because of bankruptcy, financial difficulty, or negligence. These entities may exhaust every possible avenue to collect on bad debts before deeming them uncollectible, including collection activity and legal action.
