Net Worth / Debt

5 Signs Your Debt Is Not as Crippling as You Think

July 7, 2024

4 min Read

Written by Andrew Lisa

Edited by Molly Sullivan

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America owes $17.1 trillion in consumer debt — that’s more than the GDPs of every country on earth except the U.S. and China.

Experian data shows that the average American household owes $104,215 thanks to their mortgages, home equity lines of credit, personal loans, retail cards, credit cards, auto loans and student loans.

So, if you feel like you’re drowning in debt with no hope of ever clawing your way out, you are not alone — but your situation might not be as hopeless as you think.

Dennis Shirshikov, a finance professor at the City University of New York and the head of growth at real estate investing platform GoSummer, deals with debt management for a living. Here are the signs that he said indicate your position might not be as precarious as you think, no matter how all-consuming your debt might feel.

You Have a Stable Income

If you have steady money coming in, you have the ability to budget, plan, work with your creditors, create a repayment schedule and eventually climb out from under your debt.

“If you have a stable and consistent income, it indicates that you have the capacity to make regular debt payments, which can make managing debt more feasible,” Shirshikov said. “One client, despite feeling overwhelmed by debt, realized that their steady income allowed for systematic repayment and eventual debt elimination.”

You Have an Acceptable Debt-to-Income Ratio

It’s not about how much you owe, it’s about how much you owe compared to what you earn — and if you owe only one dollar for every three that you make or even a little more, you can exhale.

“A debt-to-income ratio below 36% generally suggests that your debt level is manageable relative to your income,” Shirshikov said. “This metric provides a clear picture of your financial health and repayment ability.”

You Can Make Your Minimum Payments

Making only the minimum payments is not a sustainable long-term debt-reduction strategy. However, if you can at least keep the wolves at bay without missing payments and going into default, then you’re on solid enough ground to work out a plan and perhaps consolidate your loans.

“If you can comfortably make minimum payments on all debts, it indicates that you are not in immediate financial distress,” Shirshikov said. “This scenario allows you to strategize and prioritize debt repayment without the pressure of falling behind.”

You Have Emergency Savings

If you have money saved for the inevitable unforeseen expense, you have a healthy cash buffer and you won’t be forced to dig deeper into the hole to pay for the next blown alternator or broken window.

“Having an emergency fund means you are better equipped to handle unexpected expenses without resorting to additional debt,” Shirshikov said. “This financial cushion provides a sense of security and stability.”

You Have Good Credit

It’s one thing to have crushing debt hanging over your head, but attempting to manage it with bad credit is an entirely different challenge.

If you’re not suffering from blemishes on your credit report and a score that scares away all but the shadiest lenders, you have a lot of things working in your favor. You need good credit to accumulate debt in the first place, and good credit makes it a whole lot easier to pay back what you owe.

“A good credit score and history of timely payments suggest that you are financially responsible and capable of managing debt effectively,” Shirshikov said. “This positive track record can also open doors to better refinancing or consolidation opportunities.”

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