Early Warning Signs on Personal Debt Trouble Essay


Personal Debt Trouble is the result of a series of actions that an individual should carefully perform. The warning signs can be seen as small payments that an individual misses without realizing the consequences. The current paper summarizes four common warning signs that may create a big problem for an individual in the future. The information about these early warning signs of trouble is obtained from the article titled “Early Warning Signs of Personal Debt Trouble,” written by Marilyn Lindblad. The four warning signs are discussed separately in this paper to command a clear view of them.

Debt-to-Income Ratio

The first important warning mentioned in this article is the high debt-to-income ratio that indicates personal debt burden (Lindblad, 2018). Although it is a fact that personal debt is commonly more than the income of individuals due to their changing lifestyles, it is also crucial to regularly check that it should not reach the level that is unmanageable (Cagan & Lariviere, 2017). The reasonable level is that personal debt should not be over 20 per cent of the income. An individual should take it as a warning sign to mitigate the risk of a significant debt burden in the future.

Credit Card Management

The second warning sign is referred to as credit card management (Lindblad, 2018). The use of credit cards is very common as people utilize this service to pay for purchases even when they do not have money. They are also motivated to use credit cards as they can receive credit without paying any extra amount on repayment provided that they pay the balance amount by the specified deadline. If an individual is paying the credit card amount without interest, then it is a good sign (Ryan & Ryan, 2015). However, if there are delays and individuals repay the due amount along with finance costs after the due date, then it becomes an issue. Finance costs are an additional burden on the payer, and this charge or obligation could create a hurdle for managing personal debts.

Saving Habits

The third warning sign is the lack of savings habits. An individual cannot deny the fact that he/she could face challenging financial times. In such cases, savings are important to pay obligations on time. The leading causes of such situations are accidents, unemployment, or illness. The individuals’ ability to earn is profoundly affected, and their spending increases on medicines and other necessities of life (Ryan & Ryan, 2015). Therefore, individuals should consider this warning essential to remain financially prepared for those rainy days.

Payment at the Last Minute

The last sign mentioned in the article is related to the risk of default when payments are delayed until the due date (Lindblad, 2018). There is a risk of forgetting the payment or any other issue that might cause a delay in fulfilling debt obligations (Cagan & Lariviere, 2017). The extra charge on delayed payments is also an issue for individuals and could be considered a warning sign. An individual is liable to pay once he/she received the statement of the outstanding amount, and he/she could face financial difficulty if the payment is left until the last minute.

The summarized information in this article is important to reduce the personal debt burden. An individual should consider these signs essential and develop mitigation strategies or techniques to reduce financial risks. The warning signs are not limited to these four elements discussed in this paper. However, they are common signs that individuals experience and the best way to reduce the effect of these signs is to make early payments and manage the overall debt level efficiently.


Cagan, M., & Lariviere, E. (2017). The infographic guide to personal finance: A visual reference for everything you need to know. New York, NY: Simon and Schuster.

Lindblad, M. (2018). Early warning signs of personal debt trouble. Web.

Ryan, J. S., & Ryan, C. (2015). Managing your personal finances. Mason, OH: Cengage Learning.

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