Using credit cards is the opposite of investing


The title of this article sounds obvious but I don’t think we ever truly think about how much of a hole we dig ourselves into with credit card purchases and other consumer debt. Especially if you are carrying a balance.  Using credit cards to buy things literally is the opposite of investing.  In all that we are doing to create wealth as a community cutting credit cards up is a hard stance we have to take to ensure we don’t have any leaks in the boat.

The next few paragraphs will discuss why credit cards are the opposite of investing.

High Interest and Low Returns

If you are trying to build wealth through investing the first thing you must do is stop using credit cards.  Over the weekend I was talking to someone about the interest rates on their credit cards and they told me they were paying something like 23% interest.  Meanwhile their 401k might earn 10% if they are lucky.  The average investment returns 12% in a good year.  So if you are purchasing things at 23% and earning 12 percent that is a net loss of 11%, assuming you are investing as big as you are consuming.  Most people tend to consume more than they invest though so that loss is probably four or five times what your investments are returning.  This is assuming you can even generate a return of 12%… Imagine if you were not only losing to credit cards but also losing to the stock market. SMH!

“I thought I would be a stock market genius. Until I wasn’t. I should have paid off my cards every 30 days.” – Mark Cuban

This section right here is really the punch line of the entire article.  The numbers don’t add up.  You can’t pay 23% and gain 12% and expect to win.  You took one step forward and eight steps back. This is treading water (at best, you are actually drowning), you look good but you aren’t going anywhere (sinking).

If you took the same amount and invested it

The typical debt payment of the average person is $1,025 per month.  If you placed $1000 per month into an index fund for over 30 years you would have $2,046,088. If you had 2 million there is nothing you can’t buy. Once you get that 2 million though you don’t live out of the 2 mil you live off the gains from that 2 mil. That is another post for another day but it is a lesson worth learning.

Everything in life that is worth having follows some sort of a sacrifice.  Sacrifice in the realm of personal finance looks like contentment.

Practice Contentment 

The only way to truly win the credit game is to practice contentment.  Most people use credit cards to live above their means.  Most people use credit cards to keep up with the Jones’s.  The problem is that the Jones’s are broke and you will never be able to have the latest and best of everything because as soon as the latest comes out something new pops up.

I believe that as long as you buy right you can have something that lasts and is always in style.  When I realized that all iphones look the same I stopped upgrading just because its faster or the screen looks better.  Another way I practice contentment is buying timeless attire.  Dark suits, brown shoes and brands like Ralph Lauren and Brooks Bros will NEVER go out of style.  Its better to be timeless than up with the trends, that is if you want to win financially.

The punch line of this entire article is the title.  You can’t build wealth and load up on credit card debt at the same time.  I am not one of those people who tell you NOT to invest until you have paid off your debt though because there are lessons to be learned that are greater than the variance between returns and APR.  I just recommend that if you are in a hole, you stop digging.  Stop digging, start investing, and start doing two things at once. Pay off that debt while investing.  Stop balling out at 23% though, you look foolish.

If you would be interested in working with one of our personal finance consultants please email

Be great, invest well,

Todd Millionaire




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