We live in a very credit-based society, and nearly everyone owns some kind of debt. For some of us it’s a mortgage and a student loan, while others face credit card debt and car payments. Debt, in and of itself, is not actually a bad thing as long as the level of debt doesn’t start to get out of control.

Unfortunately, too many people cross the line from a healthy credit-and-repayment scenario to an endless cycle of growing debt. Most of us know exactly when we’ve gone too far, since it’s usually highlighted by a severe lack of money. The key is to make sure you don’t cross that line in the first place and make sure you are aware of your financial situation and take care of your debts before you find yourself in over your head.

The Different Kinds of Debt

It is important to distinguish the types of debt you may have. Some people refer to it simply as good and bad debt, but it is also referred to as investment debt and consumer debt. Good, or investment, debts are the loans we take in order to purchase things like homes or to fund a new business. These are things that could potentially increase in value and therefore be a benefit someone’s financial situation.

Bad debt, on the other hand, is where things usually get out of control. These are debts that are incurred when we purchase consumable items or things that devalue over the years. Payday loans are almost always made for this purpose. It’s important to remember, though, that as long as you stay on top of your payments, even “bad debt” isn’t intrinsically bad. It’s when you have too much of it that things get troublesome.

Drawing the Line

So how do you know when you might be heading down the road to too much debt? When is it time to start seeking a little payday loan relief? One of the easiest methods to determine your current situation is to figure out your debt-to-income ratio. This is a simple figure derived by adding up the total debts and then dividing it by the total income for the month (you can then multiply that number by 100 to express it as a percentage).

According to the Fed, a debt burden of 40% of your gross income would be considered a sign of real financial problems ahead. But you can also get more detailed than this. If, for example, you were to add up only the bad debt, and figure out that percentage, you may start to worry if you ratio is over 10% of your income.

Take a look at your financial situation and start making decisions today to control your debts before they begin to spiral out of control.