It's startling to me how many Australians who have above average incomes think they are struggling. Australia is one of the wealthiest countries in the world and hasn't experienced a recession for close to three decades. And yet, the news is always full of 'battlers' who are struggling to make ends meet in a two-income household. Sure, wages haven't been rising as much as they used to – but inflation has been at negligible levels for over a decade.
If you cast your mind back 50 years (or your imagination, depending on your age), one of the starkest changes in our society has been the availability and utility of credit.
Depression-era thinking abhorred credit – there used to be sayings like 'don't borrow money for anything except a house'. But today, there is a bevvy of companies fighting to lend us cash.
Whether it's your Commonwealth Bank of Australia (ASX: CBA) credit card, or your Afterpay Touch Group Ltd (ASX: APT) account, it's never been easier to buy things with other people's money.
And I think it's the thing that's keeping most people less wealthy than they otherwise would.
Credit is an insidious force. Sure, it can be leveraged to buy assets like property and shares. But most people use it for other things. Cars, jewellery, going to the dentist… it's very common and 'normal' to put these things on credit/Afterpay. But even if you pay it all off without incurring interest (which a lot of us don't), credit also entices us to buy more stuff than we normally would.
It's keeping us poor.
Or poorer than we should be.
If you look at our banks like Commbank or Westpac Banking Corp (ASX: WBC) – they're some of the biggest companies in Australia, and they got that way from lending us money – feeding our insatiable appetite for credit.
Think about that next time you pull out your credit card. One of the many secrets of wealth is using credit to your advantage, so don't let yourself become an asset on someone else's balance sheet without something in return. When you borrow money, you are making someone else rich, so make sure it's a symbiotic relationship and not a parasitic one!
