Millions of Americans are in debt with average national debt going up every single day. We have a 7 trillion dollar gross national debt and the average balance on a credit card is $7,000? Do you know the warning signs of too much debt? Credit is great when it's used wisely, but more and more Americans are getting in over their heads and threatening their financial futures. Remember, just because you can pay your minimum payments each month doesn't mean you don't have a credit problem.

Remember, low minimum payments benefit the credit card company, not you. Dealing with the debt has becomes an accept-able part of our personal money management plan. Some people have hundreds of thousands in debt and still find themselves is comfortable financial conditions while there are others who struggle even with couple of hundred dollars in debt. There are many kinds of debt; mortgage loans, credit cards, and educational loans. You may feel differently about different kinds of debt. Try to identify what kind of debt and how much stress you are dealing with due to your debt load alone.

There is no standard answer to this question. Each individual in debt has unique situation that must be dealt with. While there are no scientific methods to figure out if your debt load is too much, over the years, financial pundits have learned that best way to measure your debt level is by comparing it with your gross income. Remember, a $50,000 debt is no dig deal for a physician making $400,000 a year but this is a huge debt load for someone making $20,000 a year. So debt is a relative thing and best way to get an absolute picture is by using annual income in computing debt load.
Using annual income is a quick way to see the debt picture, but it doesn't give you detail information about the debt load or how it is affecting someone's financial life. To get a better picture, generally monthly debt payment and monthly income is used in Debt to income ration calculations.

One of the easiest way to understand the debt load is by computing "Debt to Income Ratio". This is a numeric value and can be calculated by dividing your debt by your gross annual income. For example, a person making $50,000 a year gross income with $20,000 of outstanding debt has a 0.40 or 40% DTI Ratio. So how heavy is your debt burden? That's what Debt to Income ratio is designed to tell you. The Fed considers a debt burden of more than 40% of your gross income an indicator of financial distress. Think about it this way: If taxes are eating up 25% of your salary, you're saving at a healthy 15% clip, and your loan payments hit 40%, you're left with just 20% for everything else. In our quiz, anything over 30% is a yellow flag, meaning there's cause for concern.

Your debt to income ratio is a basic indicator of your financial health. Another important factor that should be used in figuring out debt load is your net worth. which is a snapshot of your current financial situation and tells you what you're worth. Net worth is a very important factor in judging debt load. For example, an individual with annual income of $50,000, who own an home worth $2 million dollars and also carries a credit card debt of $50,000 is not really a big financial stress as you may think. IF you just use Debt to income method, you'll find Debt to Income ration of 100%, way higher than what most experts recommend. But this individual own a home worth $2 million and assuming it is paid off, has a huge resource pool to take care of this credit card debt.

Some debt to income calculations include your mortgage or rent and others don't. this method is recommended because it gives a better overall picture. Because many people whose ratios are within the standard guidelines struggle with their payments. How to calculate your Debt to Income Ratio? This is relatively a simple process. A - Figure out Monthly net (take-home) pay B - Annual bonuses and overtime, divided by 12 C - Other annual income, divided by 12 TOTAL MONTHLY INCOME = A + B + C Total Monthly Debt Payments Divided by Total Monthly Income = Debt to Income Ratio

..   Credit Card Resources Understanding Credit Counseling Is Debt Consolidation an Option for You? Should You File for Bankruptcy? Balance Transfer Credit Cards All About Reward Credit Cards Using Your Credit Card Wisely Top 10 Credit Card Mistakes Learn About Credit Card Cash Advances How to Cancel a Credit Card   ..

Evaluate Your Debt to Income Ratio
Most lenders will tell you that a 36% or lower debt to income ratio is good. In reality, it's difficult to apply a one-size-fits-all formula to everybody. Your personal situation, such as number of dependents, unusual expenses, and spending habits will affect how much debt you can reasonably handle, but as a general guideline, let's assume that anything over 36% would be uncomfortable for the average person.

If your debt to income ratio is:
Less than 30%: Excellent!
30% to 36%: Good. You won't have any problem with lenders, but work to bring it down below 30%.
36% to 40%: Borderline. Some lenders will still give you a loan but you may struggle to make your payments.
40% or higher: Red flag. Your credit situation requires attention.

Don't allow yourself to be lulled into a false sense of security that you have your debt under control just because you're not late on any payments and you can manage the monthly minimums.

Here are some of the warning signs that you have a credit/debt problem.

You don't have any savings and you rely on your credit cards for emergency funds.
You make minimum payments on your credit cards. This has biggest impact on your outstanding balances. For example, if you have a $10,000.00 balance on a credit card with a 24.000% APR. If your minimum payment is $300.00 and that is all you pay each month, it will take you 27 year(s) and 1 month(s) to finally get that card paid off (assuming you don’t add anymore debt to the balance). You will have also paid $12,466.09 in interest alone.
You use credit cards for things you used to buy with cash, such as groceries.
You use increasing amounts of your total income to pay off interest and/or finance charges on your debts.
You can't sleep at night: Your comfort level is a less tangible but no less important sign that you're too deep in debt. Put simply, can you sleep at night or do you stay up worrying about what you owe?
You're at or near your credit limit on your credit cards.
You count on future income in order to pay your bills, writing a check hoping that you'll be able to cover it by the time it clears your bank.
You're unsure of the total amount you owe on all your debts.
You take out cash advances on your credit card to pay other bills.
You look forward to credit card convenience checks in your mail box.
You've been denied credit because of your debt load alone.
You get calls from collectors.
You lie to your spouse or other family member about your spending or hide credit card statements from family members.

If you realize that you have got a problem, the sooner you act, the easier it will be to get out from under the burden of debt.