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How much debt is too much?  

It depends on who you ask.

If you ask your bank, it’s however much you can take on without jeopardizing their interests.  If you ask your kids, it’s whatever it takes for them to have the latest gadget. If you ask your parents, any debt is too much. 

What if you asked a professional in the world of credit and debt consolidation?

Your answers might vary. 

The debt level that you are theoretically comfortable with and the one that you ‘should’ safely carry may not align.  The important ‘magic number’ to consider is your debt-to-income ratio, which measures your debt (inclusive of borrowing costs, interest) and your income.  

In the middle of 2019, Statistics Canada found that Canadian’s debt-to-income ratio was down slightly, which indicates a decline in borrowing and an increase in income.  But how do you really know when you could be in financial trouble?  Below are some hints that you could be approaching the red and may need the assistance of a debt professional.  

Repaying Debt With…More Debt? 

Are you using credit to pay debt?  This looks like transferring your debt from one place to another, or, using one credit card to pay off another card.  Although this seems like some ‘fancy financial footwork’ on your part, it’s nothing more than a magic trick – it’s all smoke and mirrors.  You’re really moving your debt from place to place, but you still owe your balance, plus interest.

Another warning sign is if you take out cash advances from your credit cards.  If you can’t go to the bank machine and take out your own money without paying interest, you may have more financial problems than you thought.  In a similar vein, contacting your credit card company for a limit increase with the intention of using that new wiggle room to pay off your debt is another clue that you are in over your head.     

Mental Health Matters 

If your debt is causing you to lose sleep or creating anxiety, and you find yourself engaging in avoidant behaviours (not wanting to open your credit card statements, or login into your online banking) you may be in need of professional advice.  If your work productivity is being impacted because you can’t stop ruminating about money woes, or if you find yourself fighting with your partner about money more than usual, you should consider your next steps for financial wellness. Trying to manage your money problems alone is not the answer, and your family and friends may not have the knowledge or ability to help you solve such a complex problem.  Seeking out professionals (including mental health professionals) to help you is definitely worth the investment and time.  

Red Flags All Over the Place 

Some obvious signs of money issues can be missing or late debt payments.  But when do you know if you have crossed the boundary between sloppy financial management to deliberate mismanagement due to actual financial distress?  If you are deliberately missing payments because you are juggling so many credit cards, or if you don’t know your debt load, you could be in trouble. If you repeatedly only pay the minimum due on your credit card or loan, that is also a sign that you are carrying too much debt.  If you do some quick math and realize that you carry balances of more than 30% of your available credit, you may need to defer to a financial debt professional. A glaring red financial flag would be if you have recently had items repossessed, are in foreclosure, or your wages are being garnished.  

There are copious amounts of signs that can tell a debt professional that you are in over your financial head.  The good news is that you don’t have to stay there – contact a trusted debt professional today for expert knowledge and sincere advice. 

Margaret Johnson avatar on Loans Canada
Margaret Johnson

Margaret H. Johnson ACE, RQIC, is a debt expert and leader in the field of Credit Counselling. A distinguished speaker and author, in addition to becoming a very successful entrepreneur in the financial industry. She is a well-respected community member and is a two-time nominee for Entrepreneur of the Year. Margaret is the President of Solutions Credit Counselling Service Inc. and Women and Money Inc. In 1999 Margaret created Solutions Credit Counselling Service Inc. and Women and Money Inc. to provide Canadians with real access to financial education in addition to credit and debt and restructuring. Margaret is also the author of a series of books called “Doing it My Way,” titles such as Future and Estate Planning, Budgeting, Weddings, Financial & Personal Goal Setting, and How to Think about Money and Manage Credit. She is currently the President of the Canadian Association of Independent Credit Counselling Agencies (CAICCA).

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