How Much Debt is Too Much?

Debt is a way of life in America. Most Americans carry some amount of debt. There is the mortgage, the car payment, medical bills, credit cards, student loans and the money good old Uncle Fred loaned to you.

Unfortunately, many people don’t realize they have too much debt until they reach disaster level with their debt load. That’s when they get to the point where they’ll do anything to escape the enormous weight of those monthly payments.

If you don’t know how much debt you have in total, try adding up the outstanding balances on all your debt and see if the number horrifies you. Calculate how many hours you have to work to pay your monthly debt. Calculate how your total debt compares to your yearly salary. How many years do you have to work to pay it off? Calculate how much you are paying each month in interest only. Then figure out what you are NOT able to do because you have to pay debt.

Usually that’s enough for an epiphany of some kind, and there is a “light bulb” moment when you decide it’s time to turn things around. That happened to us when we hit bottom. We had a mortgage, tons of credit card debt, two car payments, no savings and an unhappy marriage filled with financial stress. We knew that something had to change, in order for us to turn around our financial mess and stay married.

If you have stopped bringing the mail into the house and let it sit in the mailbox, or if you bring it into the house and shove it into a drawer so it is easier to ignore, you may be in a situation where the debt is taking over your life.

If your credit card balance increases every month you have too much debt.

If you are just squeaking by financially each month, and living paycheck to paycheck that is a big warning sign. When your debt payments consume so much of your income that you’re scraping pennies together at the end of the month, it’s time to do something about it. 

If you’re just making the minimum monthly payments, getting out of debt can take almost forever. When you owe so much that your credit cards are rejected it is a telltale sign that things have gone too far.

Have you ever checked your net worth? If you haven’t, it’s worth exploring.  First list your assets and total them (house, car, cash on hand, bank and investment balances) then list your debts and total them (outstanding balances on your mortgage, car loans, student loans, credit cards, past due bills, etc.) Then subtract your debts from your assets. That figure is your net worth. If your net worth is a negative number then you owe more than you have. When your net worth calculation is negative, it is certainly a signal that things have to change. (Go to where you can find “spreadsheets to customize your budget” for a form to help you calculate your net worth.)

If you aren’t able to save for an emergency fund, or if you aren’t contributing to long term savings through a 401K or IRA because all the money is going to pay off debt, you are making one serious mistake. A mountain of debt can create a vicious cycle of not saving and not saving means more debt when emergencies come up.

A job loss, unexpected illness, or family emergency will throw your finances into a tailspin. Think about what would happen if you or your spouse lost your job—how long could you survive financially? How many months of living expenses and debt payments can you handle with a decreased income?

If you’re in debt and ready to make a change, you have to be ready to say enough is enough. You have to get to the point where you’re thoroughly tired of the struggle, and ready to make some sacrifices—to do whatever it takes to turn it around.

The first step in getting out of debt is to acknowledge the situation you are in, then vow it’s time to change. Start by praying for strength and guidance as well as contentment. Track every penny you spend, which will show you how much money you may be wasting on non-essentials. If you can’t pay off your credit cards every month, stop using them.

Starting with your credit cards, make the minimum payment on all your debts and funnel any extra cash to the credit card with the smallest balance, while making the minimum payment on all other debts. Once the credit cards are paid off, tackle the consumer loans, school loans then the mortgage.

We know what you are going through. When all of your expendable income goes toward debt payments, it can be disheartening. We’ve been there and it is not a happy place to be. Paying off debt is not fun and it is a ton of hard work. But, I can tell you from experience, that there is nothing better than paying off all your debt and being totally debt free.

If debt is holding you back, now is your moment to decide to stop digging a hole, and start climbing out. Getting out of debt won’t happen overnight, but the process can’t begin until you decide it’s time. Dealing with and recovering from your mountain of debt requires a life change, a total transformation.

When you and your spouse decide together that enough is enough, and you work together to pay off your combined debt, your marriage will be MUCH stronger.

Proverbs 22:7 tells us “Just as the rich rule the poor, the borrower is slave to the lender.”  Stop being a slave and get that debt paid off! The freedom is worth the struggle.

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