What is a good percentage of debt to total assets in personal finance?
I think that I would feel comfortable to have 30% of my assets in debt, but I never had debt before, so I am not sure about that.
For instance, if my total assets are 0,000, then I would feel confident in getting ,000 in debt.
It really depends on more than simply assets and debt, and it also depends on what those assets and debt are. For instance, you have greater leverage (debt capacity) if you own your own home or some real estate. Banks deal in real estate all the time, and they know the market and what to do with the property should they have to foreclose.
However, if your assets consist of stuff like a car, sports memorabilia, a rare stamps collection, etc., you probably don’t want to (and can’t) go into as much debt. These assets don’t have well defined values or steady buyers. You’d be hard-pressed to find a lender willing to take these assets as collateral, so they’re not going to help you much.
To me, the most important aspect (aside from home value, if you own one) is your salary/earnings. If you have good job security and a decent salary, you can borrow more because lenders know you’ll pay it back. However, if you’re constantly looking over your shoulder wondering if you’re next in line to get canned, then you probably shouldn’t be taking on any debt right now.
So, for personal finance: higher salary/security + higher home value = higher debt ratio.
Hope this helps.