Buying something ‘on tick’ usually refers to a purchase on credit. That is, using money you don’t have right now to buy something right now by borrowing money right now. Effectively what’s happening is that you’re bringing forward your future spending capacity to today. Do you see a trend? Now. Now! NOW!
Borrowing money is not a new concept. What is a relatively new concept is the ability to borrow money against a promise rather than exchange for something of value. For example, in a bygone era, those who could borrow needed something of value as a surety to the lender. That way, the lender, in the worst case scenario would keep you surety if you couldn’t repay the debt. Today, borrowing occurs purely based on promises. ‘I promise I’ll have a job for the next 30 years and I’ll repay the house by then…so can I live here until I do?’. ‘I promise I’ll have enough cash coming in each month to pay for the car over the next 5 years…so can I drive it around until it becomes mine?’ These ‘promises’ in our banking system can be considered valuable in and of themselves. You can buy debt as an asset…I know…but that’s not a story for this post.
My point today is about the promise we make about the future, only to be able to spend money we don’t have today. Increasingly, these promises become outright lies. We lie to ourselves that we can afford things today by assuming we’ll have the spending capacity to cover off on all the lenders we’ve promised we’d pay back. It’s a risky proposition. The lenders think they’ve got it covered based on projections of the likely value of the asset you’ve borrowed to purchase. They rely on likely outcomes and actuarial analysis to inform us [yes the lenders inform us] about how much they think we should / can borrow. If things go pear shaped, the assets’ value as well as the repayments you’ve been making are supposed to cover the debt. But who knows what the future holds? The sums don’t always add up and when they don’t things go terribly wrong.
I’m not for one second saying that there is anything wrong with bringing forward your spending capacity. What I’m saying is that things can change very quickly and drastically. Always keep in mind that the promises we make today could enslave us into the future…perhaps even for generations. Buying on tick can be a ticking time bomb.