Good financial health can be difficult to obtain. Easy access to credit, unforeseeable events, and a lifestyle that is incompatible with your budget can create debt. If your debt is too large, it can become problematic and lead to debt overload. To avoid this scenario and financial troubles, use these methods to check whether you have too much debt.
How can I determine if I have too much debt?
Ask yourself the right questions
Too much debt can mean that you are living beyond your means. To check whether this is the case, take the time to assess your financial situation and the stress it is causing you. This exercise helps you ask the right questions: Are you constantly worrying about your financial problems? Do you live paycheque to paycheque? Do you keep a budget? Do you know your debt ratio? These questions can help determine whether you are in debt overload.
Learn to recognize the early warning signs of debt overload.
In our consumer society, it can appear normal to be in debt. However, this feeling is a dangerous trap because the line between debt and debt overload is very thin. Therefore, you should pay attention to the following early warning signs:
- You continue to fall behind on your payments.
- You pay the minimum-required balance on your credit cards.
- You are stressed about your financial problems.
- You owe money to multiple creditors.
- You have received notices from collection agencies.
- You have not saved any money.
- You resort to credit cards to pay for essentials, such as groceries.
- You have no budget or avoid making one because it risks being in deficit.
- You find creative reasons to justify certain expenses.
If you recognize some of these signs, you are probably experiencing debt overload. Your situation may be considered at risk depending on the size of your debts and your means. In that case, you must acknowledge your situation and act appropriately to improve your financial health. You can calculate your debt ratio to improve your understanding of the scale of your debt.
Calculate your debt ratio
A debt ratio is a very informative indicator. Our online tool will help you measure what percentage of your pre-tax income is used to repay your debts. A ratio of 40% or higher usually indicates that your financial situation is precarious. In such a situation, we recommend consulting a Ginsberg Gingras professional at your earliest opportunity, because most likely you have too much debt.
Assess your budget
A budget is the best tool to manage your expenses, and your debt ratio is in fact determined by your budget . Making a budget and sticking to it regularly is crucial. A budget will give you a realistic picture of your financial situation. It can tell you whether your income will cover your expenses. Conversely, you will be able to see and calculate the gap between your debts and your financial resources.
In the event that you have too much debt and feel you can correct it, a budget will be a great aid. Once your current expenses have been calculated, try to save an amount for debt repayment.
If, however, you find it difficult to get on top of your debt overload, remember that we can help you find solutions. Consult us as soon as possible to avoid sinking deeper into the stress of financial troubles. Remember that you are not alone: Our professionals are available to help you.
Some final advice if you think you have too much debt
Unforeseeable circumstances that cause debt can strike at any time. You must rapidly take action to correct your financial problems when they arise. Ignoring the problem or stubbornly trying to resolve it without help may only increase your debt ratio—especially by accumulating interest. People sometimes become used to a high debt level and the stress it causes. If you have too much debt and fail to act in time, you could become trapped in a spiral of chronic indebtedness. We therefore recommend consulting a Licensed Insolvency Trustee as soon as you realize that you have too much debt.
Speak to a professional
We have mentioned a variety of tools to figure out whether you have too much debt. Calculating your debt ratio, analyzing the warning signs, and keeping a budget can all help you improve your understanding of your financial situation. Seeking the help of a professional is also very effective. Remember that at any time, our Licensed Insolvency Trustees can advise you on the best solutions for your indebtedness. The situation will become clearer and you will learn how to reduce your debts. Our consultations are free and without obligation on your part.