Managing Debt: Recognizing You Have a Debt Problem

Managing Debt: Recognizing You Have a Debt Problem

Eileen St. Pierre, The Everyday Financial Planner

(This column was originally published in the January 2014 Choctaw Nation Career Connection Newsletter.)

I remember the day we created the giant snowball in elementary school.  Before we knew it, we had to recruit others to help us push it.  Then the unthinkable happened – it fell over onto on of my classmates.  She wasn’t hurt, just a little numb.

Giant snowball Oxford

That’s probably how many people are feeling now as their Christmas credit card bills are starting to arrive.  Reality is starting to setting in.  Did I really spend that much?  Holiday spending can have a snowball effect, leading to a debt spiral that is hard to stop. The first step is to recognize if you have a debt problem.

Here are some warning signs:

  • You are stressing over money.
  • You have depleted or neglected your savings.
  • You are thinking about tapping accounts like your 401(k) that you have always considered off-limits.
  • You are starting to pay bills late each month.
  • You are making debt payments with your rent money.
  • Creditors are starting to call and send you threatening notices.
  • You are transferring balances from one credit card to another.
  • You have to use your tax refund to pay your bills.

We’ve all used our tax refunds to pay off bills at some point in our lives.  But if this becomes an annual occurrence, then you may have a debt problem.

Calculate your debt-to-income (DTI) ratio to see if you are in over your head:

  • Calculate the amount of debt you owe each month, including your mortgage or rent, car payment, and minimum credit card payments.
  • Divide this amount by your monthly income.

Here are some calculators that do the math for you:

If your DTI is 20% or less, you are doing an excellent job managing your debt!  According to Gerri Detweiler, Director of Consumer Education at, a DTI ≤ 36% is a healthy debt load to carry for most people.  If your DTI is

  •  37% – 42%, that’s not bad but you should start focusing on reducing debt now before you get in real trouble.
  • 43%-49%, you need to take immediate action to avoid serious financial difficulties.
  • 50% or more, you have a debt problem.  You need to seek professional help to aggressively reduce debt.

If you need professional help, check out these organizations: