How To Manage Debt And Build Wealth

I have received a handful of e-mails lately asking to hear my story about overcoming more than $40,000 in student loan debt to having no consumer debt and a net worth of more than $250,000 in just three years.

The title of this post is rather misleading because I do appreciate the wealth building power of leverage as I mentioned in my article detailing mortgages. Of course, mortgages are financial debt instruments that the vast majority of people require in order to purchase a home.

Why I Use Credit Cards

I also utilize one credit card on a monthly basis. I use a credit card for a few reasons:

1.) It helps me to track my expenses. I simply download my card statements to a financial program such as MS Money and divide my expenses in to categories. If I use my credit card for all of my purchases, it makes analyzing my budget a snap.

2.) It saves me money. Yes, using my credit card saves me money. When I use my debit card, my credit union charges me a fee per use (or more accurately a monthly fee that includes a number of debit transactions). When I use my credit card, the credit card company charges the business where I used my card instead of charging me personally.
Yes, you could argue that it still costs me money indirectly as the business would factor that charge into the price of the product – but please bear with my example.

3.) I receive rewards from the credit card company for using my card. My particular card offers me 2 points for every dollar I spend which, if used for travel, equates to approximately 1.75% cash back – not too bad!

I do advocate the use of credit cards for these purposes if, and ONLY if, you use them for managing monthly cash flow and not for accumulating debt. This means that you must pay off the entire balance each month – no exceptions.

To help you sort through the thousands of Credit Card offers to find one that suits your needs, I suggest using a service designed to match you up with a card that will benefit you and not take advantage of you.

My Stance On Auto Loans

Several folks have inquired about vehicle loans, asking if I own a vehicle and if so what types.

Vehicle loans are the biggest mistakes that I could ever think to make. Not only do vehicles depreciate, but they also require fuel, repairs, insurance and maintenance. There are no two ways about it – owning a vehicle is expensive.

That being said, my wife and I own two 2003 Hondas which we paid for with cash. We purchased a 2003 Honda Civic in the fall of 2005 and a 2003 Honda CRV in the fall of 2007. Yes, I do adamantly believe in purchasing high quality used vehicles that are fuel efficient and known for reliability.

Why Honda? It is simple really. I owned a 1991 Honda Civic hatchback in college and it had over 300,000 KMS on it and ran like a top. I simply filled the gas tank and changed the oil – I was hooked.

This has been a quick outline of my current stance on debt.

I also have no problem advising anyone to take out student loans to invest in themselves and their future. However, you must be careful not to “live too high on the hog” on borrowed money while in college.

Stay Tuned For The Rest of My Story

In a future post, I will tell you how I graduated from college with fewer student loans than most of my classmates and how I managed to pay off the balance within a year after attending my final class!


  1. I personally love the auto loan category. I have a 2006 GMC Envoy and it is sucking up fuel like there is not tomorrow. The reason that hit the heart is because I am going to be getting a new care in a few months and this is going to make me think. I have heard so many stories about Honda in general and think I might go for it this time. If you ever listened to Tony Robbins he talks about Honda and what he had to go through in order to start his company. It’s amazing. Thanks for the article.

  2. Matt,
    Thanks for stopping by and leaving a comment. Certainly go for the Honda – I highly recommend it.
    I have listened to some Anthony Robbins, but I have never heard anything about Honda from him.
    I’ll have to hunt down that audio and see if I can glean any nuggets from it 🙂
    Thanks again and stop by soon!

  3. They are robbing anyone they can. When you have money and don’t need credit, they offer you low rate. When you need money, they rob you blind.

    Guess what? They can’t send you to jail for not paying.

    “When the new FICO ‘08 scoring model is adapted in May, if you have a utilization of over 50 percent, you’ll be penalized even more heavily.”

  4. Great read! I have been debt free for 10 years when I paid off my mortgage at age 35. It is a lot easier to build a portfolio when none of your money is going to pay interest.

    Best Wishes,

  5. D4L,
    I hope to also be debt free at some point in the next 6 years. Although, I do wonder if I should keep my mortgage as it is cheap leverage (4.5%) and I have plenty of equity for safety.

  6. Tyler: I understand and appreciate the power of leverage. For me, paying off my mortgage was a personal choice.

    Being in finance and accounting, I have the opportunity to be involved with M&A at my company. It is exciting to see the company grow, but it is sometime tough to see other people lives shaken to their core. I fully expect to be on the other side of the table one day (I actually have been involved in preliminary talks that fell through).

    Once I saw a picture of people playing in the water at the beach with a school of sharks 30-40 yards away. The picture was taken by a helicopter pilot who routinely patrolled the beach. The caption on the picture said this was not an unusual sight and if people knew what he knew they would fear for their lives and never go in the water. Sometimes I feel that way as I pass fellow employees at work.

    Best Wishes,

  7. D4L,
    Yes, the story about the sharks is true – amazing how brave we are when we are ignorant of the dangers that surround us.
    I do applaud you for paying off your mortgage at such an early age – it must be an awesome feeling.
    I flip-flop in the subject because I feel the safety net and personal satisfaction that I would get from being mortgage free would be nice, but the opportunity cost of the lost compounding of wealth by not making investments with a higher ROI haunt me as well.

Leave a Reply

Your email address will not be published. Required fields are marked *