Living beyond your means is a big enough danger to your finances. But a less visible practice -- investing beyond your means -- can be even more destructive.

Investing with "margin" -- money borrowed from your broker -- offers the tempting possibility of turbocharged returns. But one wrong move could leave your portfolio devastated. One Fool community member lost more than $60,000 with it. My colleague Toby Shute has also detailed the margin-al adventures of Chesapeake Energy (NYSE:CHK) CEO Aubrey McClendon. Whether you're an everyday investor in your 20s or the head of a major corporation, margin can come back to bite you.

Running numbers
To see more clearly how margin can cost you a fortune, simply look at the margin interest rates some brokers charge. Schwab (NASDAQ:SCHW) recently imposed between 6% (if your debit balance was $2.5 million or more) and 8.5% (if it was less than $25,000). At TD AMERITRADE (NASDAQ:AMTD), the rates were between 6.25% (for debit balances of $1 million or more) and 9% (for less than $10,000). Keep in mind that these rates apply at a time when interest rates are near record lows!

Think about what those rates really mean. If you're borrowing money at 8% or 9%, you'd better be certain you'll earn more than that -- not only to cover the cost of the loan and deliver profits, but also to reward you for the risk you've taken on. The market has averaged 10% per year over the very long haul, but over many relatively lengthy periods, it has averaged much less. Even a promising company such as Coca-Cola (NYSE:KO) has averaged just 1% a year over the past decade. If you'd invested in it on margin, you'd have been paying a lot in interest while waiting in vain for the stock to appreciate.

Imagine paying 8% or 9% interest over a few years while invested in the following companies, all of which have earned five-star ratings from our Motley Fool CAPS community:

Company

CAPS Rating (out of 5)

5-Year Avg. Annual Return

CEMEX (NYSE:CX)

*****

(11%)

Coventry Health Care (NYSE:CVH)

*****

(9.9%)

Honda Motor (NYSE:HMC)

*****

7.1%

PepsiCo

*****

4.1%

SYSCO

*****

(2.1%)

Data: Motley Fool CAPS.

Sure, you would have seen your investment in Honda beat the market (the S&P 500 ended pretty much where it started over this period). But even Honda's 7.1% annual gain might not have been enough to cover the interest you'd have been paying in margin.

If you're thinking of making millions by using margin, think again.