Debt has been known to increase stress levels, wreck marriages and contribute to depression. Unfortunately, debt is so common that sometimes people underestimate it. It might be normal to have thousands of dollars of debt in your name. In fact, the average U.S. consumer carries over $92,000 in debt.  Still, it’s not healthy for your finances.

Take a moment to learn how much debt you should have and ways to determine if you’re in over your head. If your debt-to-income ratio (DTI) is higher, it may be time to explore debt consolidation loans or other debt relief options, like credit counseling or debt settlement, to handle your overwhelming debt load.

How much debt is too much?

You want your debt to be as low as possible so you can remain financially flexible for emergencies and your future goals. You’re likely to hit your debt capacity when you struggle to make monthly payments. How much debt is a lot? The Consumer Financial Protection Bureau recommends you keep your debt-to-income ratio below 43%. Statistically, people with debts exceeding 43 percent often have trouble making monthly payments.

The highest ratio you can have and still be able to obtain a qualified mortgage is also 43 percent. If you want to purchase a house soon, and a monthly mortgage payment would push you past 43%, you should lower your debt before you start house hunting.

Beyond your DTI ratio, you should consider how your debt load impacts your finances. If you’re having trouble paying your bills and relying on credit due to expenses that aren’t factored into your DTI, you could still be buried in too much debt. If you’ve recently missed a payment or two and your credit score is in the trenches, chances are you’re in too much debt, even if your DTI is below 43 percent.

Only being able to afford the minimum payments on your credit cards is another tell-tale sign of having too much debt. The reality is you’ll keep the accounts in good standing, but the balances could take some time to decrease, and you’ll spend a fortune in interest.

How do you calculate your debt-to-income ratio (DTI)?

To calculate how much your debt affects your monthly finances, take your total monthly debt and divide it by your monthly income. However, your debt doesn’t include all of your monthly expenditures but does include the following:

  • Monthly credit card payments
  • Alimony
  • Child support
  • Monthly rent or mortgage payment
  • Loan payments (such as student loans and auto loans)

Things that shouldn’t be calculated as part of your DTI include:

  • Cable
  • Cell phone
  • Electricity
  • Gas
  • Groceries
  • Insurance
  • Internet
  • Monthly subscriptions

If your monthly income is $3,000 and your monthly debts are $1,000, your DTI would be 33 percent ($1,000 / $3,000 = 0.33). That is a good number and isn’t considered too high by lenders.

Does debt affect your credit score?

Yes, it does, especially if it’s credit card debt. Five factors go into calculating your credit score, one of which is credit utilization. This ratio involves revolving credit (including credit card debt) and accounts for 30 percent of your FICO score.

How much credit card debt is too much? Lenders and creditors dislike seeing you use more than 30% of your available credit. If your credit cards are charged beyond 30% of your available line, they’ll think your financial situation isn’t as strong as it could be.

What kinds of debt do you need to know about?

While there are many different kinds of debt, not all debt is considered equal in the eyes of lenders. Some debt is considered “good debts” while other types of debts are considered “bad debts.”

Good debts

Good debt increases your net worth over time or has lasting value. Examples of good types of debt include things like a home purchase or an education. Houses generally appreciate over time and are considered a good investment because if you sell, you may get back more than you put in. Additionally, a college degree enables you to get a well-paying job and earn more money throughout your life.

Bad debts

Bad debt, on the other hand, doesn’t provide any type of value. It includes things you finance because you don’t have the cash to pay for them. Unlike good debt, it doesn’t add to your net worth or have lasting value.

When most of your debt comes from bad debt, it suggests that you may live beyond your means. Consider taking a hard look at your finances and creating a realistic budget. It should be one that still allows you to have a little fun but helps keep you on track to pay your bills and save toward retirement.

What are signs of having too much debt?

The following scenarios are warning signs of debt problems:

  • You live paycheck to paycheck.
  • You rely on credit cards to make simple purchases.
  • Your debt balance stays the same despite regular payments.
  • You don’t have an emergency fund and are unable to establish one.
  • Your total debts account for more than half your income.
  • You’re unable to contribute to a retirement plan.

If any of the above sounds like you, it may be time to make a few changes or seek professional help.

How do you get help if you have too much debt?

If your debt is affecting your day-to-day life and you’re asking yourself, “Do I have too much debt?” you may want to consider getting help to manage your debts. Here are a few options.

Debt consolidation loan

One thing you might consider is a debt consolidation loan. With a debt consolidation loan, you take out one loan and use the proceeds to pay off your other debts. Debt consolidation loans often have much lower interest rates than credit cards, which means more of your monthly payments go toward the loan principal and less toward interest. This, in turn, may help you get out of debt faster. Plus, you only have to worry about one payment each month.

Credit counseling

You may also consider contacting a credit counseling service to help establish a realistic budget tailored to your needs. You can often find free to low-cost credit counseling services through nonprofits, banks, credit unions, and nearby churches.

Debt settlement program

Even if it feels like you have so much debt that you’ll never be able to get out from under it, there may be options before you consider filing for bankruptcy. Depending on the total amount and types of your debts, you might be able to enroll in a debt settlement program instead of filing for bankruptcy. A bankruptcy will stay on your credit report and affect you for years to come, so it is usually a good idea if you can settle or pay off your debts instead.

The bottom line

When debt gets out of control, it affects your everyday life. When you get to the point where opportunities pass you by and you’re constantly thinking about those high balances, it’s time to take action. Life is both too short and too long to live with crippling debt.