Debt Warning Signs, and Ways to Dig Out

Over the past decade, Americans have racked up an increasing amount of debt. In fact, household debt has steadily eaten up a bigger slice of personal incomes since the mid-'90s, according to the Federal Reserve Board.

So how do you know if you are carrying too much debt?

Here are four clues that you've taken on too much debt, and four tips to get out from under it.

Clue No. 1. A high debt-to-income ratio. The debt-to-income ratio is calculated by dividing your monthly debt payments (excluding mortgage or rent) by your monthly income. Many credit counselors believe that a debt-to-income ratio of 15% to 20% is a sign of trouble. Any higher and you already have too much debt.

Clue No. 2. No savings. Your budget is stretched too thin if you can't manage to set any money aside in savings. You should be able to meet your debt obligations while still saving money in a 401(k) or other retirement account, an emergency fund or even a general savings account.

Clue No. 3. Over the limit. Straying over your credit limit once but paying it down right away isn't a problem. But if you are struggling to pay down your credit card balances and are consistently close to maxing out any of your cards, then that is a problem. This is especially true if you continue to use credit cards despite barely covering the minimum payments.

Clue No. 4. Worrying about debt. If you stress over paying bills and making payments on your debt, it's clear you have a problem. Even if you think you are better off than others, consider seeking help the moment it starts impacting your everyday life.

Tips on Digging Out

The first step to getting out from under that debt is to admit there's a problem. This means taking a hard look at your spending and saving habits, and taking action to get out of debt.