If you have too much debt!

Debt is like having a side dish or a mistress. A good mistress can rejuvenate your life and spur you to great heights. Many great men in history had secret mistresses who inspired them to do great things. However, a bad mistress can cause you a lot of heartache and pain. She can be demanding, irresponsible, manipulating and can threaten to ruin your official marriage.

Many big businesses have been leveraged with debt. And many big businesses have collapsed because of too much debt. But how does one know if they have too much debt? First you need to compute what proportion your debt repayments take from your net salary/income. This ratio should ideally be less than 40%. If you spend more than 40% of your salary on your side dish you are in trouble. Next you need to compute what proportion your debt occupies compared to your assets. Your debts should only be a small proportion of your total assets, and in any case should not exceed 50%. Basically having more than one side dish is a recipe for disaster. Within these limits you are fairly safe. Beyond these limits you are beginning to play with fire!

Having a side dish can be exhilarating, enchanting and enticing. It can also be the cause of your downfall. Ultimately in all cases it is best advised to stay away from side dishes.

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