If you’re like a majority of Americans, you carry some (or a lot) of debt. The average amount of debt per American adult is $38,000, excluding home mortgages.

That’s a lot of debt! Most of it is concentrated in credit cards, student loans, and car loans. But being in debt doesn’t have to mean you’re pinching pennies every second of every day; paying it off slowly over time is key.

In this article, we’ll discuss how to calculate your debt tolerance and figure out how much debt you can carry and still live a comfortable life.

Know your debt

Some debt is OK, especially if it’s incurred by spending on education or buying a home. These two life choices are expensive investments that will pay off in the long run.

You shouldn’t be afraid to go to graduate school because of student loan debt. You shouldn’t put off buying a home that fits your lifestyle and budget because you’ll have a mortgage to pay off. These types of debt are, if not healthy, at least acceptable.

Identify bad debt

On the flip side, there are types of debt that you should try to avoid. These include credit card debt from buying electronics or jewelry, auto loans from buying expensive cars, payday loans, and borrowing from a 401(k) or other savings account.

How much debt is too much?

Typically, if your debt is more than 40 percent of your annual income, it can feel oppressive. If you’re having to borrow money from family or friends to pay off your debts, you’re carrying too much debt.

If you’re not sure whether your debt has reached a problematic level, here’s a handy calculator where you can enter your income and different categories of debt to figure out your debt load.

Examine your monthly spending

Ask yourself the following:

  • Are you spending more than 50 percent of your monthly income paying off debt?
  • Are you only able to afford the minimum monthly payment on your credit card?
  • Do you have nothing in your savings account?

If so, you’re carrying too much debt. Every month that you don’t pay off your credit card in full, you accrue more debt on the unpaid balance. All of this adds up and can reach a point where you feel you’re drowning in debt because you can’t pay your bills on time.

Maybe you can’t get approved for credit cards, or you stop answering the phone because collectors won’t stop calling. These are all warning signs that your debt is too much.

Assess your mental and physical health

Are you exhibiting classic signs of anxiety — sleeplessness, trouble concentrating at work, relationship difficulties, constant feeling of worry, depression and/or appetite changes?

If so, that’s a big red flag that your debt is taking over your life and needs to be reduced by whatever means necessary. Another sign that your debt is too large: You don’t know how much you owe because you’re hiding from the uncomfortable truth of it.

Here are some steps you can take, starting today, to lower your debt.

The bottom line

If your debt is affecting your mental health and disrupting your daily life, you are constantly falling behind on paying off your credit cards, and debt collectors won’t stop calling, these are signs that you’ve exceeded your debt tolerance and it’s time to start lowering your debt. Contact a nonprofit credit counseling agency for more help.

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