In 2003, my wife and I refinanced our Virginia home. We'd put a large down payment on the house when we bought it, and it had tripled in value. Mortgage rates plunged, so we refinanced. We dumbfounded our Wells Fargo banker by refusing to take equity from the house, and opting to use a fixed, rather than a variable-rate, loan. I asked him how many people in our position had done the same thing, and he said, "I can't remember the last one."

One more quick story: We needed a larger car for our growing family, so we went to the dealership and bought a Volvo for my wife. When we agreed on a price, I pulled out a checkbook to pay for the car, using money we'd set aside for that purpose. "Don't you want to use leverage?" asked the dealer. We insisted we did not. Notably, the dealership's transaction system was unable to accept full payments for cars. They ended up having to "finance" the car at 0%, and then have us immediately pay off the "loan" in full.

There are all sorts of theories, conspiracies, and analyses going around at the moment regarding the Treasury-led takeover of Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). Most of them focus on the macroeconomic realities, but very few focus on the simple fact that this government action is a response to the tragedy of people losing their homes, and in many cases, their life savings.

For many people, the word "tragedy" tugs on the same heartstrings that are susceptible to puppies and Hallmark cards. So before we go too far down this particular road, let me make a controversial and incontrovertibly true statement that gets to the heart of my article: For many, if not most, of these people, their tragedy was self-inflicted. They took on too much debt. They bought too much house. They neither understood nor processed the risk they were taking on.

You can't grow rich by borrowing more
If you want to grow wealthy, you must be extremely judicious in taking on debt. There is no one out there looking after your best interests. American Express (NYSE:AXP) will give you credit to the extent that they think you might be able to pay them. Whether you can pay them and afford to eat is not their concern.

Debt is a tool. It helps people and companies buy things that they do not have the liquid assets to buy otherwise. But it also helps people buy things that they cannot afford. The two might seem similar, but they aren't. Someone earning $200,000 per year with $50,000 in the bank can afford a $600,000 house -- she just doesn't have the liquid assets needed to pay for it, and debt helps.

Someone earning $40,000 with no savings cannot afford the same house. And yet, in dozens of markets around the country, financial "helpers" allowed people to believe they could perform similar feats of financial alchemy. Is it any wonder that Ford (NYSE:F), General Motors (NYSE:GM), and even Target (NYSE:TGT) and Cabela's (NYSE:CAB) have their own finance departments? They want you to buy things. Their things. Whether you can afford their things is not their concern.

Don't buy it if you can't afford it.
I have an almost un-American hatred of debt. In the last few years, my financial decisions have been in stark contrast to those of many of my compatriots, who believed that they were borrowing their ways into prosperity. Acquaintances who believed they could "flip houses and grow rich" laughed at me and my old-fashioned ways.

I don't hate debt because it's bad. I hate it because it's dangerous. No one tells you when you sign up to get a new credit card that the free T-shirt, iPod, or whatever you get as a bonus is almost guaranteed to be expensive over time. That's because the card companies know that most people will not use credit cards as a cash flow manager -- they'll use them as a way to borrow.

There is no faster way to feel rich than to spend lots of money on really nice things. But the way to be rich is to spend money you have, and to not spend money you don't have. It's really that simple.

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Bill Mann owns none of the companies mentioned in this article. The Motley Fool owns shares of American Express. Cabela's is a Motley Fool Hidden Gems recommendation. American Express is an Inside Value selection. The Motley Fool's disclosure policy takes prisoners, names, and lunch money.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.