Have you begun to ask yourself, “Am I in too much debt?”. For many people, debt begins as a manageable part of everyday life, with an overdraft here and a credit card there. But over time, it can snowball, becoming an overwhelming source of stress, worry, and uncertainty.
According to the Central Statistics Office, more than two-thirds of Irish households have some form of debt. Having debt, whether in the form of a mortgage, personal loan, or credit card, is certainly not out of the ordinary. But how do you know when your finances are truly in danger?
In this article, we outline the key signs that may indicate your debt has become unmanageable, and we share some practical steps you can take to regain control of your finances.
How much debt is too much?
Debt is a reality for many people across Ireland, whether it’s a mortgage, car finance, or credit card balances. And it’s no surprise, given how the cost of living has soared in recent years.
But when does manageable debt become too much? One widely used guideline is the 28/36 rule, which suggests that you should spend no more than 28% of your gross income on housing-related costs (such as your mortgage, property tax, and insurance), and no more than 36% on all debts combined.
So, for example, if you earn €50,000 a year, your housing costs should ideally stay below €14,000 annually (or about €1,167 per month), and your total debt repayments shouldn’t go over €18,000 a year.
This simple self-check can help you spot the warning signs before things spiral. If your income isn’t covering your monthly outgoings, it may be time to reassess your financial situation and explore support options before things get out of hand.
Am I in too much debt?
Before we look at the warning signs to watch for, it’s important to note that if this question keeps surfacing in your mind, it may be time to assess your financial situation more closely.
Occasional worries about money are common, but persistent anxiety about bills, borrowing, and bank balances often points to a deeper issue. Perhaps you’re finding it difficult to sleep at night with the worry of mounting bills.
Or you might be struggling to focus at work due to anxiety. Or simply not being able to enjoy daily life because your every waking thought is consumed by the stress of your financial situation. Ignoring that inner alarm bell won’t solve anything; in fact, it often makes things worse.
The important thing to remember is that you’re not alone. There’s a difference between fearing and recognising that you are in financial difficulty. The latter means that you’re one step closer to beginning the course of action that will resolve the issue.
So, let’s look at the key warning signs that you might be out of your depth with your finances.
10 Warning Signs That You Have Too Much Debt
Here are 10 common indicators that may suggest you’re dealing with more debt than you can realistically manage:
- 1. Minimum payments only: You’re barely making the minimum repayments on credit cards or loans.
- 2. Borrowing to repay: You’re taking out new credit to repay existing debts.
- 3. Overdraft reliance: Your current account is permanently overdrawn.
- 4. No savings: You haven’t been able to set aside any savings for a long time.
- 5. Missed bills: Utility bills or other regular payments are often paid late or missed altogether.
- 6. Credit refusals: You’ve been declined for new credit due to your financial profile.
- 7. Financial secrecy: You avoid talking about money with family or hide your financial struggles.
- 8. Mental health impact: Debt is affecting your sleep, mood, or daily functioning.
- 9. Constant juggling: You’re frequently moving money around to avoid bounced payments.
- 10. Legal or collection action: You’ve received letters from creditors or debt collection agencies.
If you have found yourself saying yes to any of the above, then it’s time to take action.
I can’t save because of my debts
One of the most telling signs of excessive debt is the inability to save anything at all. While saving may seem like a luxury in hard times, the complete absence of financial cushions leaves you vulnerable to unexpected expenses. We have all heard of that ‘rainy day fund’, but the reality is that life is unpredictable, and it’s important to be prepared should a sudden bill arrive in the letterbox.
It comes back to our previous point on outgoings versus income. If every euro of income is tied up in repayments, it may be time to explore structured debt support. Being unable to build a safety net, no matter how hard you try, means your finances are overstretched.
Can debt affect my mental health?
Unfortunately, yes, debt can cause severe emotional distress, and this is certainly backed up by some recent findings. One such survey conducted by LIA (Life Insurance Association) found that 81% of those surveyed stated that financial instability was negatively impacting their mental health.
The pressure to meet financial obligations while trying to maintain daily life can lead to anxiety, depression, and a sense of hopelessness. If you’re lying awake at night calculating repayments or dreading the post arriving, you’re not alone.
Financial pressure affects every corner of your life – relationships, self-esteem, and physical health. Do remember that there is light at the end of the tunnel, and acknowledging the issue is the first step in reclaiming control.
I’m living paycheck to paycheck
People under financial strain often find themselves in a cycle where they’re just scraping by between paydays. This can lead to short-term borrowing just to make it to the next month.
However, this is simply not sustainable and, over time, creates an even bigger problem. Living without any breathing room often means every minor hiccup, like a broken appliance, an unexpected filling at the dentist or a car repair, turns into a crisis.
Why can’t I get out of my overdraft?
Overdrafts can be both a blessing and a curse, depending on your situation. While overdrafts offer temporary relief in a financial pothole, regular use often becomes the norm. If you never see your balance in the black and rely on your overdraft just to pay for essentials, it may be a sign that your income is being swallowed up by repayments.
You may find yourself feeling like you’re treading water, always moving but never making progress.
The ‘My Budget’ tool from MABS might be of some help.
Should I use a loan to pay off debt?
Consolidating debt into one tidy loan can be helpful in some situations, but it certainly isn’t a magical cure for all. Replacing several debts with one loan only works if the terms are manageable (such as the interest rates) and you’re able to avoid accumulating new debt. Otherwise, you run the risk of falling deeper into debt.
This is where the advice of a PIP (Personal Insolvency Practitioner) is truly valuable. They can assess whether a more structured solution is appropriate and give you sound advice on mapping out the path ahead.
Can I fix my finances on my own?
In some cases, yes. If your debts are manageable but poorly structured, you may benefit from budgeting tools, financial advice, or a short-term repayment plan. However, if you’ve already tried these and found no relief, professional guidance can make all the difference.
There is no shame in asking for help. It’s a sign of strength, and if you can show that you are trying your best to get yourself out of debt, it will stand to you in the long run.
The ‘My Full Financial Picture’ tool from MABS might offer an indication of whether you can resolve your debt on your own.
What happens if I ignore my debt?
While it might be tempting to stick your head in the sand in the hope that your financial problems will simply go away, they will still be there once you come up again for air. Here are some of the more serious long-term consequences:
- Interest and fees will continue to grow.
- Your credit rating may deteriorate.
- You may face legal proceedings or wage garnishment.
- The stress of avoidance can worsen your overall well-being.
- You may put your home at risk of repossession.
The sooner you take action, the sooner you can begin your journey towards a life that is free from financial woes. Left unchecked, minor debt concerns can very quickly escalate into a major legal and emotional headache.
How to begin tackling your debt
There are practical steps that anyone can take to begin easing their debt burden:
- Track your outgoings: Identify where your money goes each month.
- Prioritise debts: Focus on high-interest debts and essential bills first.
- Budget effectively: Set clear limits and stick to them.
- Cut unnecessary expenses: Even small reductions add up over time.
- Avoid further borrowing: Until you have a repayment plan in place.
- Seek professional advice: Especially if you feel stuck or overwhelmed.
Taking control doesn’t happen overnight, but with the right plan, it absolutely can happen. There are also some useful free tools from MABS (Monetary Advice & Budgeting Service), a service from the Citizens Information Board, including:
Am I in too much debt? Here’s what to do next
If you’ve read through this article and found yourself nodding along to multiple points, don’t wait until the situation worsens.
- If your debt is manageable, start taking proactive steps today. Use budgeting tools such as this one from the CCPC or the MABS ones above, speak to your bank, and explore community resources. The smallest of changes can make a difference, especially when you stick to them consistently.
- If your debt is unmanageable, speak to a licensed Personal Insolvency Practitioner (PIP). A PIP can offer guidance and provide practical solutions to help you free yourself of your debt.
Alan McGee & Co. are here to help
At Alan McGee & Co, you can speak directly with an experienced solicitor or Personal Insolvency Practitioner who understands both the legal framework and the emotional weight of debt. You won’t be judged. You won’t be passed around. You’ll receive clear, practical guidance in simple terms tailored to your situation.
Based in East Cork but available nationwide, our team has completed over 600 Personal Insolvency Arrangements and helped hundreds of people regain financial stability, and you could be next!
Don’t be a prisoner to your debt. Contact us today to take the first step toward a brighter, debt-free future.