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Lessons We Need To Learn From The Great Depression

It has been nearly a hundred years since the era of the Great Depression. It is only a segment of history now that is mentioned less and less in our society. The oldest members of our society are the ones who lived through it as children. It no longer a relevant part of our lives. But maybe it should be.

History is full of valuable lessons for us to use today. In fact, if we review them and apply them, we might be able to avoid some of history's past mistakes. Yes, the Great Depression can help us survive the world today, especially this day of COVID-19 survival.

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Quick Review of The Great Depression

Simply stated by History.com: "The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939." During this time, food was scarce and many people faced the future with no home or way to earn an income. It took World War II to pull the nation back from the pit of the financial hardship.

Those who survived this period still live today and can recount how hard it was to feed their family even one meal. Communities drew together, and the nation learned a lot. These are lessons that have mostly been lost over the years. We are making the same mistakes and will find it hard when the current financial crises continues its downturn.

Below are a few lessons that society learned during the Great Depression and probably should take to heart once again.

Diversify

According to a Time magazine article, "When you diversify your portfolio, you incorporate a variety of different asset types into your portfolio. Diversification can help reduce your portfolio’s risk so that one asset or asset class’s performance doesn’t affect your entire portfolio." Diversification means not to put all your funds into the auto industry or into pizza companies. Spread out what type of investments you have. Why?

In 1929, the Great Depression occurred when Wall Street crashed. Everyone lost their shirts and life savings, but did they? When we think of that crash, most of think of destitute people or an increase in suicide. While the crash did bring extreme economic hardship to the majority of the country, there were a large number who profited during that time. Investors in those areas didn't feel the pain of the crash. The movie industry, certain auto companies, aviation, and even oil. Read more on the ones who made their fortune during the Great Depression here.

Diversification during 1929 would have saved a lot of pain for many people. Instead of putting all their money in one industry or one company, the ones who didn't feel the pinch had their investments spread across industries. That way when the market crashed, they didn't lose everything, only a little. Diversification wasn't the norm for the day, but we learned that it should have been.

The Great Depression taught us how to use the stock market in a smarter way - spread your investments across industries and companies.

Neighborly Help is Needed

We've come to a time in our society where neighborly help is rarely there unless a severe disaster occurs such as a flood or hurricane. Everyone is too caught up in their own lives and going about them to notice when their neighbors need help and to pitch in. If they do, I've seen some expect something in return. The Great Depression reminded us that sometimes we need to help just to help out.

If a family had some extra eggs one day, they would offer them to their neighbor. If someone needed help with the kids, others helped out. Food was scare for some. Resources weren't always available with the lack of jobs. People had to help each other.

We've lived in a time of plenty since the Great Depression until we hit the time of the COVID pandemic. Then we found ourselves unable to find toilet paper or other essentials. We had to reach out to family and friends to see if they had any. Society turned on those who tried to profit from the pandemic and forced people who bought up all the toilet paper and hand sanitizer to give it away. It was not a time to look out for one's self.

When neighbors help each other, they have a stronger chance to survive whatever is against them. A hurricane can come through, but neighbors helping to get others to safety or share food when the power goes out increases everyone's chances.

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Have Emergency Backups

When it came to emergency backups, people found that they didn't have them when the economy tanked. This was true for money put aside for a rainy day and even for other essential items such as food and clothing. People typically had on hand only what they needed at the time. When they didn't have the money to get what they needed, they found themselves without food, clothing, or at times a home.

We have learned to have some money put aside to lessen the bite of hard times. We have learned to have a pantry with more than a few days worth of supplies. Assume the worst and be prepared for it. That became a motto of the Great Depression because the worst did happen to most of American and the Western World.

Want Or Need

Most people have a confused view of what they want versus what they need. We say we need a new car. Do we really need it, at least a brand new one? Do we really need more clothes in our closets? The Great Depression made one stop and think about what was actually needed and what was really wanted.

When we are down on our luck, we have to filter through those needs vs. wants thoughts. Streaming channels, upgraded cell phone, new carpet, a fancy haircut. All these feel like needs until we don't have the means to pay for them. Then we begin to see that needs are very basic. Wants can cripple us financially.

Recently, the large economic downturn during the pandemic had many rethinking wants and needs. It is only when times get really tough are these evaluated and acted on. We need to have a car, but we don't need to drive someplace just for the fun of it. We need food, but we don't have to order delivery each time.

Need and want are not the same thing and should be carefully monitored, especially when times are getting tough.

Avoid Debt

When people get into too much debt, they find that the slightest downturn in their finances can lead to complete disaster. Before the Crash that led to the Great Depression, people were living high. They partied and spent money every chance they could get. It was the golden years after The Great War, later known as World War I. When the market crashed, no one had money to pay their debts. Banks called in loans. Banks closed up. Destitution replaced spending fever.

In today's world, it is nigh impossible to go through life without being in debit to some degree. Most of us have to take out a load to buy a house, pay for college, or get a car. With that in mind, you need to make sure what debt you do have is manageable. If you lost your job, could you still afford to pay on the debt while you looked for another job? Can you pay all your debt timely now with the income you have or are you just hoping for an influx of cash? Live within your means and avoid debt wherever you can.

Be Creative in Saving Money

Saving money doesn't always have to be taking money out of your paycheck on payday and putting it in a savings account. Being prepared for the worst means you need to get creative.

Save all your loose change. I used to think that was a dumb idea, but my father id it regularly. He travelled Monday through Friday for his job in a day before credit cards being the normal way to pay. When he got home on Friday, he'd empty his pockets of all the loose change and put it in a drawer. My mother was able to use that money to buy all the Christmas gifts for the year. Money was put aside at no pain to their pocketbooks.

Cut costs and put savings in a jar. If you pay less in a particular category than you budgeted for, take the difference that you saved and physically put it aside. You can quickly see how much you are saving. It becomes real to you then.

Get creative.

Conclusion

History is a continual lesson to us all on how to live in today's world and tomorrow's. The Great Depression influenced an entire generation and their own descendants. Yet the fact that the event is nearly a hundred years in the past makes it something relegated only to the history books. The lessons learned from it are fading away as each one who lived through it leaves us.

We need to revisit this time period and take its lessons to heart. While COVID did not lead us to such dire straights as the Great Depression, it did hint at it which caused a panic with the average person. But if the lessons from the Great Depression had been in the forefront of the mind, the negative impact would not have been so severe.

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

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