It’s worth considering your own debt in the same way you would analyse that of a company, if only to keep you on top of your finances
When looking at a business to invest in, one of the important issues is debt. We expect to see companies carrying some debt — ideally for growth and not day-to-day expenses. If the debt can create returns ahead of the cost of the debt, then it is positive for profits and good for the business.
Using this we turn to debt:equity which is your debt reality to your net worth. This is very much a moving target. A young family starting out, having just bought a house, with a car loan as well, will have high debt but little “wealth” as they start out. Somebody in their fifties, on the other hand, should have a lot more wealth and less relative debt.
But if it has been trending higher simply because you’ve been taking on more debt, then it could well be cause for concern.
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