Keep Debt Growth Below Income Growth

Formulation

Do not let debt rise faster than income for long, because rising debt burdens eventually constrain spending, creditworthiness, and stability.

Use When

Use this when judging households, companies, governments, sectors, or whole economies where borrowing is increasing.

Do Not Use When

Do not treat this as a ban on debt. Debt can be useful when it raises future income enough to service itself.

Source Support

Dalio states this as a rule of thumb near 00:29:42-00:30:16, after explaining credit pull-forward, debt burdens, and deleveraging.