Depression Era Advice That Pays in a Pandemic. Lesson One.
Updated: Jan 26, 2021
Lesson One: Live within or beneath your means.
Can we improve our current financial situation by studying the past? Let’s take a look.
Many Americans saw the economic boom of the Roaring '20s as an excuse to live beyond their means. Money seemed to pour in, and they didn’t hesitate to buy big-ticket items with small down payments and contract to make monthly installment payments with the interest on the balance moving forward. It was a mortgage mindset that applied not only to housing but to everything from cars to clothes, vacations, and anything else that caught their eye.
In the enthusiasm for a better life, the distinction between needs and wants was blurred and often lost entirely. Clear, well-thought-out goals were abandoned in a desire for having it—now! Marketers and advertisers call it an “impulse buy.”
In the economic crash of 1929, those who had been feeding their impulses found themselves in a tough spot. Carrying debt, which seemed perfectly safe in the boom economy, created mounting debt when people lost their jobs. The debt caused by impulse, compounded with increasing interest, meant people lost their homes, cars, and other property. Life in the reality of the Great Depression dashed cold water on the wild optimism of the earlier years of that decade and left a large number of people in financial chaos.
Tom Brokaw describes the Great Depression as a time “when everyday life was about deprivation and sacrifice when the economic conditions of the time were so grave and so unrelenting it would have been easy enough for the American dream to fade away.”
During this pandemic, learn from history as you plan for the future. The past suggests ways to maximize your family’s financial safety and security. One of the most important actions you can take at the present time is to avoid running up debt—or begin paying down debt that you already have. Depression-era logic still makes good common sense. Keep a budget for your monthly expenses, and try your best to purchase only things you actually need, not just want—with money you have on hand.
An added benefit is that this may provide an opportunity to talk seriously with family members and have your family all on board with plans for the future. What are your goals? What assets do you have at the present time? What steps do you need to take in the short term to make your goals reachable? What are your long-term plans? Even young children can benefit from an early interest in financial planning, geared to their level of understanding, of course. Remind yourself that living below your means—always spending less than you earn—is the foundation of any financial plan.
Financial planning is more than retirement, wealth management, and estate planning. We’re here for you now, and willing to help you evaluate and consider any financial decision.
While budgeting can be overwhelming for many, we can make it simple to bring order and a level of security to your financial future. If you’re not great at keeping track of your finances, let’s talk. We’ll help you set out your goals, both in the short term and the long term. We’ll literally build you a financial roadmap of your goals, your needs, and your wants. Together we’ll help you stay on target for your monthly spending requirements and your savings objectives.