How much debt is too much debt?
I’ve always lived by the rule that if I had more than 10% of my salary (gross) in debt, it is too much debt.
This for me, does not include mortgages, but it does include car loans and I am half-half on whether it includes student loans as well.
I’ve always seen cars as consumer debt rather than an investment because let’s face it, once you drive it off the lot, the value depreciates.
I can concede that a home is an investment for many (forced savings!), although I am never going to be swayed into shelling out $600,000+ for what is essentially a chipboard shack loaded with existing structural, electrical and all sorts of problems in my opinion.
I’d rather rent than own if the prices are unreasonable, and in Canada, they certainly are!
As for student loans, on the one hand, I myself went into $60,000 of debt to get the degree I got to go into the field I am currently in, and without that degree I never could have made it.
On the other hand, a lot of people go to college to get degrees that they’ll never extract the full value out of in the real world, so I am going to put this one into the ‘grey zone’.
In general, my threshold for debt is zero. I don’t like it and I try to avoid it, low interest rates be damned!
WHAT’S YOUR THRESHOLD FOR DEBT?