The miracle of credit
Imagine a man with his salary of 800 reais, married to a woman who has an income of 1,200 reais. The purchasing power of this family is restricted to 2 thousand reais. Imagine that this family has no access to banking, credit cards or any other type of credit. Considering that food and basic household expenses (water, electricity) represent 40% of family income, we would have a family with purchasing power of R $ 1,200.00.
As a result, this family would have a purchase limit, forcing them to buy one household item per month. A refrigerator this month, a television in the other, and so on. This is because there is no possibility to leverage their purchasing power, generating a limiter.
This situation is bad for the economy.
By restricting a family’s purchasing power to its real income, we are forcing the market to produce less, hire less and generate less wealth. Over time this situation gets worse, generating inertia in the economy. To make matters worse, companies are starting to produce more and more in order to reduce their production costs and (theoretically) increase their profits. For those who do not know, this scenario would be more or less the summary of the crisis of 29.
Imagine now that this family has a credit line worth 10x the value of their purchasing power. At this point I am saying that it has gone from a limit of 1,200 to a purchasing power of 12,000. What before they could get in a year, they could get in 1 month! With this we have an increase in demand and the need to increase the supply of products in the market. Because companies need to produce more, hire more, and people with higher incomes and access to credit lines consume more. A miracle!
Right tool, wrong users.
As you saw in my xucro example, every kind of credit line
Be it the overdraft, the credit card or the personal loan – is meant to leverage a person’s purchasing power so that they can consume more. This strategy was what saved the world after the 1929 crisis. And that’s what has been saving the world ever since.
The problem is that we mere semi-rational mortals are not prepared to deal with overwhelming purchasing power. Added to the lack of financial organization and planning, we have a time bomb that pops every day in someone’s hand.
This miracle is still incredibly powerful for anyone who knows how to organize and plan to use their money. Considering that today anyone can have a credit card, it is possible to improve their purchasing power absurdly. If you consider an annualized income along with the annualized credit limit, you will find it very easy to build an equity out of nothing, with a buying power of $ 2,000.
Now, for you to harness all this “power,” you need to start your financial planning. Is fast!