Phillips can expect a warm welcome when he returns to the Stadium of Light for today's Premier League clash after twice helping the Black Cats to seventh-place finishes in the top flight.
But Phillips feels a lack of investment at that juncture cost Sunderland and they were relegated two years later.
And he is hoping Blues will take advantage of a successful first season back amongst the elite and bring in more quality players.
Phillips said: I felt the second season we finished seventh at Sunderland, we needed to go out and spend £10-15 million on three or four players.
I believe if that had happened, it would have made us a consistent Premier League team for a long time.
But it never happened and the next year we struggled and the season after we got relegated. I just hope Birmingham don't go down that same route.
I believe with the manager here, and the funds we have here, that won't happen.
The manager resisted in January spending ridiculous money.
He believed he had enough in the squad to stay in the league and it is going to be an exciting summer for the Blues fans out there to see who comes in.
I think this club will attract top players with the manager we have got and owners who seem ambitious.
Birmingham are in contention for a Europa League spot after defying the pre-season claims of bookmakers and pundits who were predicting a quickfire return to the Coca-Cola Championship.
Phillips insists Europe has not been talked about but believes Blues have a golden opportunity to make 2009-2010 a season to remember.
He said: Europe has not been mentioned here. I think all that has been mentioned here is let's not take our foot off the gas'.
We have got here through sheer hard work and determination and good football.
Let's not throw it all away with eight or nine games to go.
Phillips has reiterated his desire to continue playing for at least another season, although it remains to be seen whether that will be at Birmingham where his contract runs out in the summer.
He said: I am definitely going to play on for another season. I feel fit to play on for another year or two, definitely another year. I'm not ready to retire yet.
I spoke to Niall Quinn in the week and one thing he said to me was 'play on as long as you possibly can'. He said after he finished, three months later he was wishing he had never retired.