Many people have some form of debt, but have you ever wondered whether yours was excessive? It may be if a disproportionate amount of every paycheck goes toward your debt obligations. Read on for more signs and what to do if you have too much debt.
Is Personal Debt Common?
Personal debt is common. As of early 2025, some 83% of U.S. households carried some type of debt, according to a survey by the Certified Financial Planning (CFP) Board. Excluding mortgages, the average personal debt per person was $21,500 in 2025, Northwestern Mutual research showed.
In addition to auto loans, a common source of debt is credit cards, with the average balance totaling $11,303 per household and $6,730 per person in Q4 2024.
What’s the Personal Toll of Debt?
The link between debt and poor mental health has long been established. Individuals carrying debt are more susceptible to mental health issues such as depression, stress, and anxiety. For instance, a survey reported that due to debt-related stress, 48% of respondents experienced sleep problems, 40% had increased anxiety, and 34% suffered from depression.
Debt can also adversely affect physical health. Chronic financial stress has been linked to elevated blood pressure, heart disease, and a weakened immune system.
What are Signs That I Have Too Much Debt?
It’s difficult to tackle a problem you don’t realize you have. So, here’s how to know if you have excessive debt.
Your Debt-to-Income (DTI) Ratio is High
Your DTI ratio reflects the amount of your monthly income that goes toward debt payments. Financial experts often recommend keeping your DTI under 36% being best. Lenders use this metric, among others, when considering loan or credit applications.
To find out where you are, divide your total monthly debt payments by what you bring in monthly. Include any payments from personal loans, auto loans, mortgages, credit cards, or other creditors.
Your Balances are Increasing Rather Than Decreasing
A good way to know if your debt is becoming an issue is if your balances are growing each month instead of decreasing. You may need to consider another financial strategy if you consistently add to your balances instead of paying them down.
You’re Depending on Credit Cards for Everyday Needs
You may be heading for financial trouble if you’re regularly turning to credit cards for day-to-day purchases. This could be a sign that you’re living beyond your means and may need to work on cutting expenses.
You’re Borrowing Money to Make Other Payments
Regularly borrowing cash to make payments on other financial obligations can indicate that you’re spending more than you have.
You Can Only Make Minimum Payments
It could be a red flag if you can only afford to make minimum payments on your credit cards. While it might keep your account in good standing, it barely chips away at the balance because most of your payment goes toward interest. This makes it difficult to pay off your debt and can cost you significantly more in the long run.
You Can’t Save for Retirement
If you’re unable to put aside money for your golden years, you probably have too many expenses relative to your income. Consider what you can cut that still allows you to pay off your debt and save for retirement.
You’re Unable to Build an Emergency Fund
You might have excessive debt if you find that there’s never enough money left over to start an emergency fund. Without these savings, you’ll have to use credit cards or take out a loan for life’s inevitable unexpected expenses.
What to Do if You Have Too Much Debt
Depending upon your total debt load and DTI ratio, there are moves you can make to get back on track. Those include:
- Analyzing your situation: Take a clear-eyed look at your finances, including what you owe and to whom.
- Establishing a budget: You must have a structured plan for tracking your income and expenses, avoiding overspending, and saving for goals.
- Prioritizing your debts: If you’re having trouble paying off every debt each month, you should carefully prioritize the creditors you do pay. For example, debts secured by your property should come before unsecured debt.
- Paying off debt with highest interest first: If you’re tackling credit card debt, focus first on the accounts with higher interest.
- Considering credit counseling: If you think you can pay off your debts with a bit of professional help, credit counseling may be for you.
- Enrolling in debt settlement: On the other hand, if your debt has overwhelmed you, you may want to pursue debt settlement. That strategy could result in you paying less than what you owe on your balances.
The Bottom Line
Having debt isn’t unusual, but when it starts to consume your paycheck, limit your financial freedom, or take a toll on your health, it’s time to take a closer look.
The good news? No matter how overwhelmed you feel, there are clear steps you can take to regain control. You can build a path toward financial stability and peace of mind by recognizing the warning signs early and exploring your options.
Your current situation doesn’t define your future. With the right plan, you can move forward with confidence.
