Save. Spend. Splurge.

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!




  • Mary@be

    To have a debt is not good at all as always I say. So whatever the percentage it is that’s not the issue I think. If someone wants to know how much would be considerable then I would like to say that below 5% is acceptable. So whatever you shared on it that’s very much inseparable for having no debt. Thanks

  • SP

    I don’t know if this is a useful metric to come up with. You should target consumer debt of zero.

    When you get out of school, ideally your student loans are <10% of your income – but if they aren't, that doesn't necessarily mean you are in a bad place – you are an example of this. You should just pay them of (to $0) as soon as you can (or if the rate is low and you think it makes more sense to do other things, fine – but paying to $0 is a good default position).

    You should target a car loan of $0 too. If you can't, you should just make it as low as possible. Allowing it to be 10% of my income would be arbitrary, and unnecessarily high.

    Mortgages (which you exclude) have all sorts of rules of thumb to go by, many of them not that helpful anyway, but at least something.

  • Cassie

    Right now I’d say my threshold for debt is the amount I’m able to payoff on the next payday. Having gotten rid of all consumer debt in our household (credit card, LOC, vehicles, student), I have no interest in taking any on again. In fact, I currently have my eye on obliterating our mortgage! I estimate that even with me going on mat leave this year, I should be able to have it wiped out in the next 6 years.

  • raluca

    I like to say that cars are just a higher form of toilet paper. They are consumables, even if they cost a lot more than the humble toilet paper.
    Life is harder without a car for me, so I get the appeal of buying one. But even if you buy a 100,000 dolar car, eventually you have to replace it, because it will die. Or if you don’t replace it completely, you have to invest in replacing it piece by piece because they are consumables and sometimes they don’t even last as long as some washing machines in some cases.

    I would never condone getting into debt to buy a car, unless you are living somewhere rural and would like to commute for a better job somewhere in town. In that case, the car is a tool, just like a laptop.


      You have the greatest play on words.. “higher form of toilet paper” 🙂

      I would agree with that, but also because I don’t really care about cars or driving a nice one. The one I own is old and I love it.

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