Another reason for using leverage may be a kind of "risk-smoothing" in the same sense as consumption smoothing. This requires treating "potential lifetime earnings" as a monetizeable resource; a non-fungible asset that can be tapped for money.
For most people, that resource is very large. It is higher in those who are young, salaried, and professional. E.g. 100k/year over 35 years is 3.5M. For others, it's near zero or negative:
viewtopic.php?t=13054
For most people, their liquid assets tend to be small. Very few inherit anything close to 3.5M at a young age. As such when comparing financial assets to the earnings resource, the latter appears so much larger that the financial concerns are almost negligible. Basically, going to work pays 10,000x better than investing for the average near-zero-asset person. It takes quite a while to flip this dynamic, but it's entirely possible for a great many people if they will to choose.
You'll know if this applies to you if your monthly savings contribution from your job >> average monthly return on invested capital in which case your NW looks like a straight line up regardless of what the market does. (Check out some of the journals to see this effect.)
Calculate the inflection point where market returns begin to matter as much as regular savings as
annual income * savings rate > savings * 0.06
(going with a historical 6% EPS growth rate)
If we rearrange that a bit, writing
savings = years of savings * (1-savings rate) * annual income
so
annual income * savings rate > years of savings * (1-savings rate) * annual income * 0.06
and eliminate some terms, so
savings rate / (1 - savings rate)/0.06 > years of savings
we see that this happens at 16.66 years of savings for a savings rate of 50%. This is the point where people actually begin to notice market performance on their NW compared to how much they're saving.
If someone puts even more into savings, say 80%, the salary contribution will still dominate until one has .8/.2/0.06 = 66.66 years of savings.
I suspect this is why investment performance seems immaterial to those who are still earning and saving [hard] when they look at their NW graphs. Ironically, normal people who tend to save little will find their returns dominating their contributions much sooner and thus begin to question whether further savings efforts are even worthwhile. See some WL2-3 personal finance blogs for posts that try to convince people to continue saving despite market fluctuations [to the downside].
(WLOG, if your investment metric is [dividend] income based instead of NW based [total return], you can just use your dividend yield instead of the 0.06. And if you're in a booming ZIRP economy, you can use 10%+.)
Overall, I think one's perspective on this is very much determined by where one stands. Here's what it looks like from the other side when assets > potential lifetime earnings, or alternatively, passive income > potential earned income.
I currently have 168 years of savings. A lot of this is due to not spending much, but even by normal consumer standards, this throws off quite a bit of money. At 6%, it corresponds to $70,000/year which is more than the median wage. In terms of actual dividends, we're talking 31k which is still 4x+ my spend.
Lets compare to my remaining lifetime earning potential. I'm 48 and it's been 9 years since I last worked a job. In principle, I'm still sharp/fit/healthy enough to "compete" for money at market rates, albeit w/o the benefit of [my] education which at this point is thoroughly deprecated. However, the thing is also that I don't really want to and I don't want to risk having to if I can avoid it. If someone throws money at me, I'll take it, but I'm metaphorically not very keen on moving closer in order to catch it. Therefore a lot of my investment strategy is focused on "preserving income" rather than growing NW.
One thing I've learned over the past 20+ years is how fast money-earning can go from hero to zero. I've gone from "I love my work so much I'd do it for free" to "I'd rather remove my eyeball with a spoon before continuing another year" within a space of 2 years. I've also gone from "This is great. I can't believe people are willing to pay me to do this!" to "This is great. I can't believe nobody wants to pay anyone for doing this?!" in terms of what I prefer to spend my time on. The market-economy really is a very limited space for human expression. Draw a 2x2 Venn diagram for added hilarity.
Thing is, I think that leverage, which offers no free lunch, is a way to change the value-surface under the presumption that people both
can and
will (want to) work at something that gets paid. In my experience that presumption does not hold for at least one person.
This is for sure a way to stay engaged with the income-side of the economy and some forumites have a strategy of not saving too much specifically to avoid getting tempted away from keeping their skill-set sharp enough to engage with that [earning] side of the economy. OTOH, there's more to the world than spending a lifetime working for or with the economy, so other forumites prefer to engage with asset-side of the economy prioritizing optionality and safety rather than getting richer.
After all if your marginal dollar doesn't matter in the first place, why risk it to grow it into two marginal dollars that still don't matter? Why not make it safer?(*)
(*) On a tangential note, this is the military equivalent of deciding between quality and quantity of troops.
All that to say is that leverage is "financial engineering TANSTAAFL" but useful to make tactical adjustments if you know your risk/income/asset/... surface both in terms of where it is and where it will be.
Personally, I've found my surface changing unexpectedly over my lifetime. I don't know if that has been due to fortune ($$$), maturity, temperament, ... but I do know that changing the course of a supertanker portfolio is $@#$@#%^ so "lifetime" insights are really valuable.