Copyright 2006 Stephen Ashton

People go into debt for a lot of reasons. Maybe you purchased a new home or car that was above your means, and now youre struggling to pay it off. Perhaps you lost your job, and ran up your credit card bills on necessities. Perhaps you got into debt through gambling. The reasons for being in debt are as unique as the people suffering from debt. The key is in knowing when your debt has simply piled too high, and then being able to make an action plan to reduce or consolidate your debt. Here are ten warning signs that you may be in too much debt:

1. Youre living paycheck to paycheck. If your bank account runs dry towards the end of the week, before you get your next paycheck, youre probably in over your head with debt. You should be able to pay your necessary bills, and still have money left over to put into savings.

2. You cant pay every bill each month. If you have to make a decision each month about what bills you can afford to pay (i.e. letting your phone bill run a month behind, so you can keep your electric turned on, or vice versa), then you probably have too much debt. Your bills shouldnt exceed your income in any amount, but especially not if youre being forced to make a choice between necessities.

3. You applied for credit and were denied. This is a more obvious sign that youre in too much debt. If this happens, and you dont know why, order your credit report immediately and find out whats wrong. Remember to fix anything on the report that isnt correct.

4. You regularly overdraft your bank account. If youre cutting checks to pay your bills, and theyre bouncing, youre probably in too much debt. The same is true if you write a check for more than you currently have in your account, hoping that a deposit in the next day or two will be processed in time to cover it.

5. Collectors are calling you. This is another of the more obvious signs that youre in too much debt. Although they may seem frightening, ignoring collectors wont make them go away. Theyll likely just become even pushier. Your best bet is to answer your phone or call them back, explain your situation, and see what they can do to work with you. Some will be able to lower your interest rates or be able to give you an extension on your payment dates.

6. Your credit cards are maxed out. Credit cards should never be pushed to their limits. You should always keep an adequate amount of money available on them for an emergency, if one comes up. Running them up on material things that you cant afford is a sign that youre in too much debt.

7. You have more than five recurring debts. Having more than three credit cards at any one time can be a sign that youre in too much debt. Couple that with more than two loans or other revolving credit (for a mortgage, car, student loans, or a computer loan), and youre just asking for debt troubles.

8. You use your credit cards for everyday expenses. If you find yourself using your credit cards to buy groceries or other necessities, because you dont have enough cash at the time to purchase them, youre likely in too much debt. Use your credit cards for occasional expenses, not basics like food and utilities.

9. You only make the minimum payments on your debts. Being able to make your minimum payments on all of your debts each month does not mean that youre in control of your debts. Creditors love people that only pay their minimum amounts, because it means theyll make the most interest. The longer it takes you to pay your debts back, the more you have to pay over time.

10. You dont know how much you owe. This is the biggest sign that youre in too much debt. If youve ignored your debt to the point where you dont even know what you owe, youre likely in more debt than you think.

If two or more of the warning signs above apply to you, youre in too much debt. The best thing you can do for yourself is to evaluate your debt, and work on a plan of attack for reducing or consolidating it. The longer you wait, the worse your debt will become, so get started on building a brighter, debt-free future for yourself right now.