3 Lessons from Prior Recessions and the Great Depression That Can Guide Us TodayThe Great Recession of 2007-2009 and the Great Depression of the 1930s may seem wholly different from each other and not at all like what we’re experiencing today. However, all three economic downturns have one thing in common—there are certain behaviors that can help us better weather the storm. Increase Your Saving Just because you qualify to borrow money doesn't mean you should. With interest rates at near 0%, and a lot of messages that consumers will drive the economic recovery by increasing their spending, it’s tempting to make big purchases. But debt is a huge handicap in a prolonged economic downturn. New and/or big monthly payments can lock you into a lifestyle that you can’t escape if the downturn lasts longer than predicted, or other unforeseen life events create additional strains on your resources. Stick With It History has repeatedly shown that sitting tight is the key to successful stock market investing. You can’t avoid risk by exiting the stock market. In fact, staying in the market allows you to buy when prices fall so when they eventually rise again, you’ll likely recover faster. You may feel the impulse to exit the market, but patience is essential. It’s important to stick to risk tolerances consistent with your long-term goals and objectives and be diversified among sectors and asset classes. Reduce, Reuse, Recycle The origin of this phrase is often debated, but most tie it back to the 1970s and the movement to increase environmental consciousness. However, our parents, grandparents and/or great grandparents who lived through the Great Depression had already figured this out. Though they were focused on keeping their families housed, clothed and fed—not on the health of the planet—the same behaviors benefit our financial well-being, too. They never used something only once. Nothing was disposable or wasted. Can you live without the newest iPhone? Is your car reliable? Is your home safe and affordable? Above all the hardships that Americans endured during prior recessions and depressions, those who survived and eventually thrived were creative and flexible and supported one another—all behaviors we can learn. These are challenging and uncertain times, but help is just a quick call away. If you want to review your financial strategy or discuss additional options, please call the office for an appointment.
P.S. What is one of the best things to do with your money during a recession? Pay off your credit card debt. Paying off a card that charges 18% interest is roughly the equivalent of getting an 18% return on an investment. And you’re not likely to get that from most other investments during a recession. |