Quiz: Are You in Debt Over Your Head?

Jan. 14, 2004 -- How do you know if you are in over your head with debt?

At nearly $2 trillion in total consumer debt, the average amount of debt per household is $18,700. In credit card debt alone, the average amount is about $7,000 per household, and for the 60 percent of credit card holders who do not pay off their balances each month, the average amount is closer to $12,000.

Are you one of the millions adding to the national consumer debt tab? Take this short quiz to determine if you are swimming in debt and are in need of a credit lifeline…

1. How many sleepless nights have you had because of your debt?

A) I sleep like a baby. B) Every month just around bill time.C) Warm milk just isn't cutting it. I am up almost every night.

2. How many credit cards do you have?

A) 0-2 B) 3-4 C) More than 4

3. On a monthly basis, how much of your total credit card bill do you pay?

A) Am I supposed to pay my credit card bills monthly? B) Pay it in full.C) Just the minimum baby!

4. Do you put off opening your credit card statements because you are afraid of what is inside?

A) No. Bring 'em on…B) Sometimes.C) Yes. I'm petrified.

5. Which of the following have you done to pay down your debt?

A) I declared bankruptcy.B) I sold personal items or borrowed from a friend or family member.C) My debt is under control.

6. What percentage of your after-tax salary goes to paying off your credit card debt?

A) 0 to 10 percentB) 10 to 25 percentC) More than 25 percent

7. Does your significant other know how much credit card debt you have?

A) Are you kidding? I would never tell him/her that!B) Yes. My life is an open book.C) Sometimes. It depends on the month.

8. Are you struggling to pay your fixed expenses because of your credit card debt?

A) Yes. My credit card has me up against the ropes.B) Occasionally I get knocked down.C) No, not me.

9. What kind of spender are you?

A) I earn it. I spend it.B) I spend it before I earn it.C) I earn. I save it.

10. If you see something you want to buy:

A) I use my credit card, regardless if I have the cash in my account.B) I don't buy it, but dream about it instead.C) I try to stay within my means, but sometimes I can't resist.

Scoring:

1. a-1, b-2, c-32. a-1, b-2, c-3 3. a-3, b-1, c-24. a-1, b-2, c-3 5. a-3, b-2, c-16. a-1, b-2, c-3 7. a-3, b-1, c-2 8. a-3, b-2, c-19. a-2, b-3, c-1 10. a-3, b-1, c-2

If you scored between 10 and 15, you are doing a good job managing your money. You are aware that a credit card should not be a substitute for money you do not have in your account. In addition, you are likely taking the necessary time to think about how you spend money. If you scored between 16 and 23, you are dangerously close to sinking into debt. Time for you to take a moment to figure out what you owe, create an action plan to tackle your debt; and most importantly, put a temporary freeze on all non-discretionary expenses.

If you scored between 24 to 32, you need to take immediate action. Your spending is out of control. You need to completely eliminate credit cards from your life. Work with your creditors to try and negotiate a lower interest rate and payment plan — one which you think you can pay back in a timely and efficient matter. Also, do a serious audit of your expenses to see what you can cutback on indefinitely. Finally, consider getting a second job — one dedicated exclusively to paying down your debt.

Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is Good Morning America's personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributedto this report.