In Debt Distress?

Ray LinderWhat's very heavy yet easy to carry?

A credit card balance! Though debt is an oppressive financial and emotional burden, most families carry it. According to, the typical household has credit card balances totaling $8,500 spread across 12 credit cards.

The problem with big credit balances is that they obligate your future income to payments and prevent you from doing other things with your mony in the years to come.

To calculate your debt burden, add up all your monthly debt payments: mortgage, car, all other loans and credit cards. Then divide that amount by your monthly gross income (before taxes or any other deductions). Ideally, your monthly debt payments should be less than 38 percent of your monthly gross income. If your debt percentage is less than 28 percent, you're in great credit shape. But if it's close to or greater than 50 percent, you are in debt distress.

Monthly debt percentage is just one sign of credit balances that are too heavy. Here are four more symptoms that diagnose debt distress.

Maximum balances. A single maxed-out credit card indicates you have consistently spent above the level of your income.

You can only make minimum credit card payments. Maxed-out credit cards usually mean minimum payments, which not only point to debt distress, but they assure you will stay in debt. For example, if you pay just the 2 percent minimum on an $8,500 balance ($170) and you are charged 15 percent interest, it will take 38 years and $22,000 to pay off the bill!

You are not able to save. When debt payments prevent you from saving, you are in debt distress and likely to stay there. Saving helps you meet future needs and provides funds for current unexpected expenses, which otherwise would go onto a card.

You feel emotional pressures from your debt. If you ignore your bills, feel anxious about your debt or fight with your spouse over money, you're probably in debt too deep.

Get out of debt distress by acknowledging you have more debt than you'd like. Then, resolve to get out of it. First, for one month, spend only cash. Next, write down everything that you spend to become more aware of your buying habits. Finally, commit to cut spending by 10 percent, and use that money to begin paying off your debts.

True, it's far easier to get into debt than to get out. But by disciplining yourself and changing your spending habits, in time your burden of debt will lighten.

Article copyright © 2003, Ray Linder.
All rights reserved. International copyright secured.
Used by permission.

Ray Linder is the founder and CEO of and an internationally recognized teacher of team success and personal development. He is author of three books, including What Should I Do With My Money? — How Your Personality Affects Your Financial Behavior. Ray is an associate of Otto Kroeger Associates, the world’s leading training firm for the Myers-Briggs Type Indicator. He has over 25 years of business experience including corporate finance, investment management, fundraising and development, consulting, sales, pastoral ministry, and small business management. Ray, his wife Christine and their two daughters live in Sterling, Virginia.