A Life Without Debt: Building Wealth

If you are at all interested in finance, you’ve probably heard that it is necessary to be debt free in order to build substantial wealth. While a few gifted investors manage to build wealth while having a lot of real estate debt (think Trump) or debt that finances a business venture (think the people who started Google), that isn’t the reality for most of us. For most of us, the money we earn from our regular jobs is what we have to work with in order to build wealth. And the only way that money can go toward building wealth is if it’s not going somewhere else (like credit card debt).

I’ve seen this reality in my own debt free life. When we were young, we didn’

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12 Responses to A Life Without Debt: Building Wealth

  1. Debt is a shackle that keeps too many people from enjoying life. Sure that car is nice and your furniture looks good, but you can’t afford for your kid to play soccer and haven’t been on a good vacation in years because you have too many payments.

    I went to business school so I know all about how useful debt can be, but I’m still terrified of it.

  2. Ken says:

    I like to carry a large mortgage for the tax benefits and with rates so low .. I believe over time my investments will return more money instead of selling them to pay off my mortgage.

  3. jr says:

    What are EFT’s?

  4. Shane says:

    A million net worth by mid-30s !! That’s inspiring !!

    Well Done ! :-)

  5. Kate says:

    Shane, I’ll second that! I am truly inspired by your savings success. Being in debt, especially credit card debt, is a hard habit to break, but it’s something that all of us can achieve if we are willing to make small sacrifices throughout our lives. Whether we are choosing a less glamorous car or a more modest home, we can use “the power of small” to make a huge difference in our bank accounts!

  6. Diane says:

    Good for you! It goes to show what is possible when 2 people work together with the same ideals.

    I wish I’d been that wise when I was younger! Though I’m finally debt-free, it has put me years behind in retirement funding.

    I’m trying to teach my sons a better way of doing things. I hope some of the younger readers out there are taking note!

  7. jr says:

    I asked: What are EFT’s?

  8. Sadie says:

    @ jr. EFT/ETF'(some people abbreviate one way, some another) are Exchange Traded Funds. A good explanation of them and how they differ from mutual funds can be found here:

    http://www.fool.com/etf/etf02.htm

  9. CPA says:

    Ken,

    The many fees you will pay for your house include property taxes, insurance, maintenance costs, repair costs, and interest expense (which your tax deduction only partially offsets). Also factor in any closing costs you paid as well as a realtor’s commission you will pay / have paid. Furthermore, houses appreciate on average over the long term at about inflation or maybe 1-2% above inflation. It is possible that your house is a good investment, but it’s also much more likely that you are missing a chance at earning good money in the stock market or another investment long term because your cash flow is tied up in your house (which you may or may not be making money on – even at average appreciation.)

    Also, that house appreciation mentioned above is not guaranteed by any means, and if you for any reason go into foreclosure you lose your entire investment (in other words, you are risking a lot.)

    Tax benefits and low rates do not necessarily equate to a good investment. Those are just two of many factors to consider when determining if you are making money on a house.

  10. Saddie –

    I think your story is great testimonial of what can happen when people live below their means and practice delayed gratification. I graduated from college about 2 years ago and while I was able to land a nice job with a cushy salary, school left me 45K in the whole. Furthermore, the economy has left me with many job uncertainties. I decided that work alone was not going to let pay off student debt as fast as I wanted to, so I decided to work for myself and started a business. I’ve met with a lot of entrepreneurs in my industry and seen the income potential that is possible if you’re, your own boss and are willing to work hard. I’ve even met 7 figure/yr earners.

    What do you think about business as a means to build wealth? Have you and your spouse ever thought about starting a business? Why? Why not? I am interested in your perspective!

    I look forward to your response. Thanks!

  11. Tg says:

    CPA, I wish everyone would read your post. I have heard the ‘I’m keeping my mortgage for the tab break’ line way many times. It is simply not a good investment for the reasons you outlined.

  12. James says:

    Well said Sadie. The long term difference of a life spent saving and investing really starts to tell in your mid 30s.

    My wife and I managed to get our wealth up to 1.1 million, using what seems like a similar process to you.

    http://www.dinksfinance.com/2014/04/net-worth-up-to-1-1-million/

    The one thing we are doing that you don’t seem to involved in as much is investing in real estate. So, for example we have a couple of investment properties which help to build our net worth.

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