According to Ambrose Bierce the definition of debt is as follows:
“Debt n. – An ingenious substitute for the chain and whip of the slavedriver.”
Debt is an enslaver. All who are under debt experience the chains of stress as due dates approach and the lashes of pressure to pay them off. There are compassionate loan agencies, such as Platinum Direct, who are eager to help with debts, but at the end of the day, the only person who can solve the problem of debt is you.
As long as debt hasn’t multiplied itself like a virus, you have a better chance of paying it off. However, there are some debts that you’ve allowed to evolve to a monster by feeding it and prolonging it. Here are some signs you have too much debt:
1. You have more than 2 credit cards
Any person should never have more than one credit card. Credit cards give the illusion of having instant cash, well you do in a way, but cash that isn’t yours. That credit card may be in your wallet, but the value in it isn’t really yours.
You’re just borrowing it. So whenever you see a credit limit of $50,000, that doesn’t really mean that you have $50,000 to spend. Just think how much more if you had 3 credit cards, in your head that’s $150,000 at your disposal. This is a recipe for a disastrous debt. Having 3 credit cards is like juggling 3 women – it spells disaster.
Limit yourself to just one credit card or two at the most. Don’t give yourself the illusion of having money at your disposal when in fact you don’t. The moment you start to fall into debt because of this, it may be insurmountably difficult to pay it back.
(Related – Choosing the Right Credit Card? Consider These 10 Factors)
2. Your credit cards are maxed out
You know you’ve got a heavy handful of debt if you’ve maxed out all your credit cards. If you’ve done so, you have a real problem dealing with reality. If you’ve got an income of only $5,000 per month, what were you thinking when you maxed out a $20,000 credit limit on 3 different credit cards? That’s $60,000 spent on a single month.
Did you really think the bank was okay with you paying them off after 5 years? Okay, I may have exaggerated a bit, but it’s only because I want to drive my point across. Deal with reality, know how much you can pay off and stick to spending only that much.
(Related – When Should I Use A Credit Card?)
3. You are late in your payments
Being in debt is a terrible situation. It sucks the life and sanity out of you because it’s always there at the back of your mind. Aside from trying awfully hard to make ends meet, you still have to stress about payments. And if you’re behind on your payments it means you bit off more than you can chew on your loans and credit.
When you are already in this situation, you only make your debts worse because of ‘late’ penalties. You have to re-evaluate your priorities. Cut off on all unnecessary spending. If you have to tighten your belts for a couple of months, then cope. It’ll all be worth it when you’re finally debt free.
(Related – Pay Your Bills On Time)
4. You have no savings
Another warning sign of being in too much debt is having zilch on your savings account. This means that the moment you receive your salary, it goes straight to payments and basic necessities. You should never borrow or have too much credit to the point that you can’t save. Saving should be one of your top priorities. Choose saving over a pair of Jimmy Choos.
If you are already behind on payments and dealing with so much debt, saving might not be practical now. But, make sure that you at least have health insurance to cover you just in case something happens. If you don’t have insurance, you will plunge into an even deeper abyss of debt – should something happen (knocking on wood).
(Related – 101 Ways to Save Money Everyday)
5. You’ve borrowed money from everyone you know
Borrowing from friends is a bit dangerous. Gene Brown even said, “Before you borrow money from a friend, decide which you need more”. It takes a very desperate person, to borrow money from people they know personally – it debases you and strips off any ego you may have had.
This is a much too clear sign that you’re handling too much debt.I had a friend once who did so, she said it was deeply embarrassing and wouldn’t want anybody to be in the same situation.
Small debt, big debt, good debt, bad debt – does it really matter? Debt is debt. And it enslaves all who are under it. If you see these signs of debt plaguing you, then brace yourself and develop a strategy on how you can pay it all off as quickly as possible.
Author Bio: +Lara King is a student of finance completing her MA in Sydney. She likes to write about loans and refinancing and is doing a thesis on loan practices in Australia.
SB’s Thoughts – I agree to all the above points except the first one. Simply because I carry 4 credit cards and I never been in debt. I do not use more than 10% of my credit line on any of my cards. I strongly encourage readers to read our very popular post 51 Ways to Get Out of Debt in case you are looking for ways to free yourself up from debt trap.
There is a calculator at MSN Money which can tell you if your debt is too much. You need to put your monthly income, mortgage payment amount and total consumer debt you have. Here’s another article that may tell you if you have too much debt.
Readers, a simple question to you, how much debt you think is too much? In terms of percentage of your income or assets.
Money Beagle says
If you’re not able to apply anything to savings, you have too much debt, and will likely only take on more as something comes up, which it always does.
Lara King says
Exactly! That’s one thing most hoarders don’t realize. They kept on acquiring loans they can’t really pay.
Thanks for your comment.
Lance @ Money Life and More says
I suggest changing #1 to you have any credit cards with balances. As long as you can keep balances at zero all the time I don’t care how many credit cards you have. The second you carry a balance you have a problem though.
Lara King says
you do have a point. But sometimes people use another credit card to back up their other credit card and hence would compound more interests and more debt.
Thanks for your comment.
[email protected] says
We are in debt but not like that. We have currently three credit cards. One I use for my school because I get reimbursed after the semester and I get reward points for that. One we tend to pay off in full every month. The last one was a balance transfer on an existing card we had. I will plan on cancelling the school card once it is paid off as I do not want three cards. I do however like having two because occasionally I will try to use the one card we use all the time to consolidate our expenditures but it may not scan. This could be at a gas station or grocery store and I am buying things we need and do not have cash. It is nice to know I have a back up card in my wallet for that purpose.
Lara King says
I appreciate your comment. Like what I’ve said, other people use more than 2 credit cards to back up their other cards. once they get blocked because of balances and debts, they’ll use their other credit cards to purchase and compound balances as well. That’s what I’m trying to point out. There’s nothing wrong if you are using it the right way. I’m glad you know how to.
Jenny @ Frugal Guru Guide says
I have TONS of credit cards, but they’re almost all empty, and the couple that aren’t are paid off every month.
I got most of them because they paid me at least $150 for opening the account, either in discounts (Toys R Us–bought a playset when we opened the account) or in cash back (which has been as high as $300). I certainly don’t regret opening any of the accounts! 🙂
I am not sure about the repercussion of not using the cards altogether for a long time.
Natalie F says
You have to be responsible when handling credit cards. I never think of them as available money, but as money that I can have for emergencies. I hate owing anyone anything, and i feel the same way when i use credit cards.
I have the same mentality. I always return the money owed to people as soon as possible.
KC @ genxfinance says
When you feel like being chocked all the time with all the bills and mortgage and no savings, then you are ins o much debt already. And you need to do something about it fast.
I like 2, 3, 4, and 5. But #1 is only a problem if the others become a problem. I am not sure if credit score would be a problem, but I think having a couple of credit cards and not abusing them is fine. I have some that give free insurance, some that give free currency conversion, and some that give points. I use them based on what I am buying, but either pay them off at the end of the month or actually keep them with a positive balance and use them like a debit card.
As you say, however, if you cannot do that and limit what you spend, then I agree that 1 credit card is a max (possibly even too many).