Debt Can Make You Wealthy

When did you first apply for a loan? Was it in college when you got your first credit card? As soon as you got your first job? When you financed your first car? Or when you bought your home?

Regardless of when it happened, you may now find yourself in debt and feeling overwhelmed. The good news is that you are not alone. Most people in the United States have some form of debt.

We all started using credit in one way or another, and initially it may have made us feel financially empowered. We often assumed we would pay it off as soon as we got a better job, received a promotion, or started earning more money.

The problem is that life does not always go according to plan. Maybe you lost your job, became sick, or simply took on more credit than you could comfortably handle.

Using debt to pay for things is common in America. Debt can also be a useful tool for achieving important goals. We can finance our education, purchase a vehicle, buy a home, or invest in a business. In business, this is often called leverage—using available resources and borrowed money to create greater opportunities.

The important question is not simply whether you have debt. The question is how you use it.

There is nothing inherently wrong with using debt when you use it responsibly and follow a financial plan. Your plan should consider your lifestyle, fixed expenses, variable expenses, savings, and debt obligations.

A properly designed financial plan can guide your daily financial decisions. Just as you allocate money toward housing, food, transportation, and other necessities, you can intentionally allocate money toward paying down your debt.

Here are several examples to consider: 

Suppose you take out a $10,000 line of credit to fund a business venture with a monthly payment of $300.

If the business begins generating enough revenue to cover its expenses and loan payments, the borrowed money may have helped you create a profitable business. You leveraged your resources to create an opportunity for yourself and, potentially, jobs for others.

Of course, there is also risk. If the business fails, you could still be responsible for repaying the $10,000.

That is why debt should always be considered within the context of risk, opportunity, and your overall financial plan.

Now imagine using that $10,000 toward purchasing your own home.  Buying a home generally requires qualifying for financing and having sufficient funds for expenses such as a down payment and closing costs. Your monthly mortgage payment, property taxes, insurance, maintenance, and other housing expenses can also put pressure on your budget.

What happens if you lose your job or experience another financial setback?

You could find yourself struggling to make the mortgage payment while still owing the $10,000 you originally borrowed.

Again, borrowing money is not automatically good or bad. What matters is whether the decision fits comfortably within your financial plan and your ability to manage unexpected circumstances.

Another possibility is using part of the $10,000 for experiences such as a family vacation, eating out, or spending quality time with loved ones.

Money is not only about accumulating assets. It is also a resource that can help us enjoy life, strengthen relationships, and create meaningful experiences.

Spending time and money with the people you love can bring happiness and strengthen relationships. After all, one of the reasons many of us work so hard is to provide a better life for ourselves and our families.

Nothing guarantees us another day with the people we love. Enjoy your family, appreciate your pets, work hard, and make time to enjoy your life.

However, remember that borrowed money must eventually be repaid. Enjoying life should therefore be balanced with responsible financial planning.

Suppose you take out a $10,000 student loan to help pay for your education.

You will eventually need to repay the loan, but your education may also create access to better employment opportunities, higher income, and greater career flexibility.

The education itself becomes an investment in your knowledge and future earning potential.

The point of these examples is that borrowing $10,000 is not automatically a bad financial decision. Each situation provides opportunities, experiences, or resources that may improve your life personally or professionally.

As you experience life, you also develop knowledge, skills, relationships, and resourcefulness. Those things can help create additional opportunities and potentially increase your wealth later in life.

Without taking reasonable risks, you may sometimes limit opportunities that could help you grow.

If you remain in a job where your income is not increasing and never invest in yourself or pursue new opportunities, you may become financially and emotionally stuck.

At one point in my own life, I followed financial advice that focused heavily on penny-pinching and avoiding spending. For me, that approach created frustration and a mindset centered on scarcity rather than opportunity.

I eventually realized that financial planning should not simply be about restricting yourself. It should help you make better decisions about how to use your resources to create the life you want.

There is another part of financial planning that is very important to me personally: God, our Creator.  Many times, we make major financial decisions without including God in the process.

For me, prayer should be part of important decisions. I believe God has provided for us throughout our lives and can guide us toward the wisdom, discipline, and opportunities we need.

My wife and I experienced significant financial challenges of our own. At one point, we were dealing with more than $400,000 of debt. Over time, our circumstances changed dramatically. We obtained state jobs that provided more than $200,000 per year in combined income and developed businesses that generated additional income.

More importantly, our relationship with God became stronger.  Those experiences changed the way I think about money.  Life is about continuing to learn, grow, and develop new skills. By trying, learning, and adjusting, you become more resourceful. Over time, those skills can provide additional choices and opportunities.

I believe God expects us to be good stewards of the resources and opportunities we receive. That means continuing to learn, working hard, making thoughtful decisions, and putting our knowledge into action.

The ultimate goal should not simply be to become a millionaire.  For me, the greater goal is to be a responsible steward of the resources He provides.

To reduce financial stress and the risk of serious financial problems, you should continually work to strengthen your finances while following a holistic financial plan.

Your financial plan should help you make better decisions about:

• Income
• Expenses
• Savings
• Debt
• Investments
• Insurance
• Housing
• Education
• Retirement
• Lifestyle goals

Some financial advice focuses almost entirely on becoming debt-free. Eliminating unnecessary debt can certainly be valuable, but debt itself should not automatically make you feel that you have failed financially.

The bigger goal is to learn how to use your resources wisely.  Debt, when used appropriately and responsibly, may help you pursue education, purchase a home, build a business, or create other opportunities. But it requires planning, discipline, and an understanding of the risks involved.

Regardless of your decisions, always work to maintain strong credit and show future creditors that you are a responsible borrower.

Are you ready to make a difference in your financial life and become a wealthier person?

One of the most important things you can do is spend a few minutes each day reviewing how you use your money.

A simple daily financial planning strategy can help you allocate your income more effectively, increase savings, reduce debt, and steadily improve your financial position.  The purpose is not to become wealthy overnight.  The purpose is to make better financial decisions every day.

Over time, those small decisions can create significant results.  Continue learning. Continue improving your skills. Continue looking for opportunities. Use debt carefully. Protect your credit. Manage your resources wisely. Follow a financial plan.  And most importantly, live your life with purpose.

Debt does not have to control your future. When used appropriately, combined with financial discipline and a clear plan, it can sometimes become a tool that helps you pursue your personal and financial goals.

Art De La Rosa
Financial Planner | USC Graduate | Author
Wealthy Dollar