How-To Figure Out If You’re In Debt

by Ryan Yates

Debt Can Hurt

Debt can be a mean many things to many people. Some people might consider $500,000 of debt a good thing. The debt may include $400,000 on a home mortgage, $25,000 on one car loan, and $75,000 in student loans. The thinking is that the mortgage is an investment that will increase in value over time, while the student loans were the price of admission for your career, and the car is required to look the part.

The problem with this thinking comes into play when something terrible happens. Some common problems would be a job loss, a car accident, or a natural disaster. These are all examples that will impact their monthly income. The house of cards can come tumbling down and leave families will an enormous problem, especially if they are living paycheck to paycheck.

Live Beneath Your Means

Other people have zero debt and are living happily beneath their means. These are people who have grown up being taught that debt is not an indicator of wealth, or people who have been in debt and have hustles their way out of it. These people make sacrifices of their time and energy to build a better financial house for their families.

These people have emergency funds to protect them from the disasters listed above. They don’t have any consumer debt (credit cards, student loans, car loans, or boat loans). They are people who love to save and invest instead of being aspirationals. Aspirationals are people who are will do anything to act and look rich, a term crafted by Dr. Thomas Stanley who wrote the book Stop Acting Rich.

Which type of person would you rather be? The person who is living paycheck to paycheck but looks like they are doing well? Or the person who is doing well and can absorb any obstacles that life will throw at them? You may be in one of these two groups already, and you may be perfectly happy. If you are, GREAT!! If you are unhappy, or are somewhere in between we need to take a look to see how bad your debt load is.

Indicators of Debt

There are many indicators of debt. An overall measure of the level a debt a person has is called net worth. Other indicators can include; missed payments, collection calls, bounced checks, overdrafts, inability to sleep, savings accounts at or near $0.

Negative net worth

Having a net worth in that is negative is the simplest way to test it you are in debt. Net worth is calculated by taking your total debts and subtracting them from your total assets.

Assets: House value $200,000 + Savings $3,000 + Retirement $50,000 = $253,000
Liabilities: Mortgage $250,000 + Credit Cards $30,000 + Student loans $20,000 =$300,000.

Calculation: $253,000 – $300,000 = -$47,000

This person has $47,000 worth of debt if they had to liquidate all their belongings today. How-to calculate net worth offers a more in depth explanation of performing the calculation.

Missed Payments

This is one of first signs that you are over your head. Missing a payment means that you do not have the money to pay the debt. Not having money means that you are in debt. It’s that simple. Utilities bills, car payments, credit card payments, and housing payments are all commonly missed payments.

Bouncing Checks/Overdrafts/Zero Savings

Bouncing checks is another sign that you may be having financial trouble. A bounced check means that you have over spent the amount of money you have in the bank. It can mean that you’ve just overlooked your balance and made a mistake, or that you are continually living on the financial edge. Over drafts are just like bounced checks expect that they apply to debt cards or credit cards. This simple means that you used the card to make a purchase that was over the amount you had available to spend. Both of these issues can be avoid with a separate saving account tied to the accounts, but a person in debt usually doesn’t have any saving to fall back on.

Collection calls

If you have received one collection calls, you are in debt. A company will only make a collection call if you have missed paying your bills. Some companies will wait until you’ve missed three payments; others will wait one day after a payment is missed. The point being, a collection call should be an absolute wake-up call to you that you are in debt.


If you are constantly worrying about money, having arguments about money, or can’t sleep at night you definitely have money problems. Having debt and a negative net worth are all contributing factors to your worrying.

These are all symptoms of debt. Debt is not a curse. You can get out of debt with focus and hard work. Take a look through the DeliverAwayDebt achieves for inspiration. There are many articles about beating debt, working hard, and enjoying life. You have a choice to make. Remain in debt and continue worrying about money, or take action and eliminate the debt so you’ll have a brighter future. Good luck.


Que April 27, 2010 at

It’s like you are living in my house! Stop it! I qualify for most of that (including the negative net worth (and the amount is close too)). It’s been hard trying to find an extra job (and that includes delivery). So I did the next best thing… I reduced my debt substantially by changing shifts at work so I can stay at home with the kids during the day. That saves us a bundle on childcare. It’s almost as good as getting a nice raise. That plan goes into affect next week. So if I survive this, I will be a better man for it and my family will see the benefits.

Thanks for the post. Good stuff.
.-= Que´s last blog ..Inspired Epiphany =-.

Jeffrey Kosola April 27, 2010 at

Hey Que, switching shifts is never an easy thing for the family. I’ve worked all three and they have there ups and downs. I’m proud of you for realizing the montiary benefit to switching shifts. It will be different, it will be hard, but you WILL be a better man for doing it. You are also setting a great example for your kids. Just remember that when you get your net worth in the positive, you can begin to slow down a little and build wealth. Keep up the hard work, it will all be worth it in the end. AWESOME job Que!!!

Forest April 28, 2010 at

Hey Jeff, I am in debt but it’s controlled for now….. I am aiming hard to get it paid away and gone forever. I was sick of chasing payments, much like you I am sure.

Here is to living below our means….

PS: The Deliver Away Achieves…. small typo 🙂
.-= Forest´s last blog ..Where To Find Cheap One Way Flights =-.

James May 5, 2010 at

this is a very insightful way to look at debt Jeff and i think it will help many people understand more about debt/debt prevention.

i personally do not own a house but thats because 1. i live in So Cal. and cant afford a $750k place can also because i am kinda scared to give my entire nest egg away hoping that a house will increase in value.

so for me i’m not in debt but i also don’t have any major investments that are great assets.

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