too much debt

How do you know if you’re in too much debt?

04 May, 2016

How do you know when you’re in over your head? The concept of “too much debt” is different for everyone, but the warning signs are the same. Perhaps you’re starting to find it a bit of a juggling act managing your mortgage, car loan, and a couple of credit cards?

You’re certainly not alone; ING DIRECT statistics show 38% of Australians have a mortgage; 83% have a credit card (and 67% of those have two or more); and 21% of households have a personal loan. Multiple sources of debt means multiple sources of interest, and those charges can start piling up faster than you realise.


The build-up of debt

Personal debt levels tend to creep up over time, just like our weight. You don’t just wake up one day and find you’re 10kg overweight and none of your clothes fit anymore. It happens gradually over time; you find your clothing becoming a bit tighter, you can’t move around as easily as you used to, and eventually you have to admit you’ve let things slip.

In the same way, unless you suddenly lose your job or are hit with a big bill for something unexpected, debt becomes unmanageable over a period of time.

It might start with a home, a car, a holiday or two on a credit card, and before you know it you’re relying on that card more and more to pay for everyday expenses like groceries. The monthly repayments are adding up, you’ve reached your limit on your card, so your only option is to dip into your savings. You might even consider taking out another loan.

Your finances are at tipping point, then your car breaks down and the savings fund you had set aside for emergency expenses like that is almost gone. You decide to skip your mortgage repayment for a month with the intention of making it up next month, but of course you’re already struggling so that money is hard to find.

In the end, people risk losing their homes, their livelihoods, and even their super savings in an attempt to clear their debt. In the most drastic of cases, bankruptcy may be the only solution.


Knowing you’re in too much debt

For most people, it doesn’t need to get to the point of missed repayments for them to realise something is wrong. Feeling constantly squeezed at the end of each month should be enough of a sign that your finances are in need of some attention – just as feeling the squeeze on your waistline as you get dressed should tell you that you need to watch your weight. But the stress of feeling that your debt is getting out of control can cause great anxiety and affect your personal and work life, so it’s best to take action as soon as you identify the problem.

Unfortunately, as with weight loss, there is no quick and easy solution to a debt problem. It will take time and perseverance to turn things around, but as you gradually whittle away at your debt you will feel a gradual sense of relief and freedom. Bankruptcy really is a last resort, and one that relatively few people need to consider – even if they do find they have taken on too much debt.

Keep browsing our articles for plenty of specific guidelines and actions you can take to get your debt under control.


In summary:

  • You probably know when your debt is starting to get out of control. Don’t ignore that feeling
  • Before you get to the point of skipping repayments, take some action
  • The process may be slow and painful but you can successfully reverse your debt problem
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