Debt is generally considered manageable when we can meet our financial commitments without significantly affecting our daily life or other financial goals.

In other words, we are able to:

• Make our payments on time.
• Cover our household’s essential expenses.
• Continue saving, even in small amounts.
• Handle minor unexpected expenses without taking on new debt.

💡 The size of a loan alone does not determine whether debt is manageable. What matters is how it compares to our financial resources and circumstances.

Even when borrowing decisions are made responsibly, circumstances can change.

For example:

• A temporary loss of income
• A serious illness
• The birth of a child
• An increase in interest rates
• A significant unexpected expense

Any of these may affect our ability to manage financial commitments that previously felt completely affordable.

This does not mean we have failed in our financial planning. It simply means that circumstances change, and our plans need to adapt accordingly.

The shift from manageable debt to financial difficulty is usually gradual.

We may begin to notice that:

• It is becoming harder to keep up with monthly repayments.
• We have stopped saving because all available funds are going towards debt payments.
• We rely more frequently on credit cards for everyday expenses.
• We are postponing other important financial goals in order to meet our repayments.

⚠️ These signs do not necessarily mean that we are over-indebted. However, they may indicate that it is time to review our financial situation and debt management strategy.

We do not need to wait until serious financial difficulties arise before reviewing our situation. A few simple questions can help us assess whether our financial commitments remain manageable.

Ask ourselves:

• Do I make all my repayments on time?
• Do I have enough money left for essential expenses after meeting my financial commitments?
• Could I cover an unexpected expense without borrowing?
• Am I still able to save, even small amounts, for the future?
• Do I feel in control of my finances, or do my financial commitments cause ongoing stress?
• Have I relied on credit in recent months to cover everyday living expenses?

💡 If one or more of our answers raise concerns, it does not necessarily mean that we are over-indebted. However, it may be a good opportunity to review our budget and strengthen our financial resilience.

The earlier we recognise that debt is becoming harder to manage, the more options we are likely to have.

For example, we can:

• Review our budget.
• Temporarily reduce non-essential spending.
• Increase repayments where possible.
• Contact our lender early if we expect difficulties in meeting future payments.

Taking action early usually provides more flexibility and options than waiting until serious payment difficulties arise.

✔️ Debt that is manageable today may not remain manageable forever.

✔️ Changes in income, family circumstances, or interest rates can affect our ability to repay a loan.

✔️ Regularly reviewing our finances can help us identify potential difficulties early.

✔️ Early warning signs do not necessarily indicate over-indebtedness, but they should not be ignored.

✔️Prevention and timely action are often the most effective ways to protect our financial wellbeing.

👉 What's next…

So far, we have explored what debt is, the different types of borrowing, how to evaluate the true cost of a loan, and the practices that help us manage debt responsibly.

However, even with careful planning, financial difficulties can sometimes build up, causing debt to become difficult to manage. Understanding how this happens is essential—not to create fear, but to help us recognise the warning signs early and take action before problems become more serious.

In the next article, we will learn what over-indebtedness is, how to recognise the warning signs, and the practical steps that can help prevent it.

🔗Useful Links:

• What Is Over-Indebtedness?
• How Does Over-Indebtedness Develop?
• How Can We Prevent Over-Indebtedness?
• Recognising the Early Warning Signs of Over-Indebtedness