How much debt is too much?

Easy! Borrow until your nose bleeds, you can’t sleep at night, or you’re finding it hard to breathe.

Then pay a little back.

Nope. That’s definitely not the way to do it. But there’s no simple calculation either. How much borrowing is too much is as personal as a finger print.

For some, the right amount of borrowings will be zero. Others might get into trouble with just credit cards. Some would sweat bricks with a modest home loan.

A home loan and some investment debt is probably where most people feel comfortable. Others, including some property investors, will sleep like a baby even with literally millions of dollars worth of debt.

Can it be a multiple of your income? Perhaps. But it depends on what you’re using the debt for. Tax-deductible investment debt is easier to “service” than non-deductible debt.

Debt is a tool, a machine. Machines give leverage – they allow you to do things you couldn’t otherwise do yourself. For instance, you can’t save your way to buying a house.

There are other things you shouldn’t use debt for. Credit cards are cancers on your financial health unless you pay them in full every month.

Generation Xers are, even with midgets running around, at a stage of life where they should be setting up their futures.

Saving, investing and superannuation are parts of that equation.

And debt-based investment strategies will make sense for some. These are borrowings for investment properties and shares, are something that will be a risk worth taking to grow real, future, wealth for those able to take a risk.

Bruce Brammall is the principal adviser with Bruce Brammall Financial (www.brucebrammallfinancial.com.au) and author of Mortgages Made Easy.