by Dana George | Updated July 25, 2021 - First published on Oct. 29, 2020
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It's natural to feel insecure after financial setbacks. Take these steps if you want to feel better about your financial future.
For many Americans, the combination of COVID-19 and the current recession ushered in a period of loss and fear. After more than a decade of many of us telling ourselves that the state of the economy was bright and only getting brighter, reality crushed our slightly-out-of-touch optimism.
Questions arise. Will we ever feel "normal" again? What will the world look like after the pandemic and recession? Will we ever stop washing our hands 50 times a day? Is there anything we can learn from this that will make us wiser and more resilient?
To get an idea of what a post-pandemic/recession world may look like, we peeked back at how our grandparents and great-grandparents behaved following the Great Depression.
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The Great Depression lasted from 1929 to 1939, and was the deepest economic downturn of modern history. The 1920s (known as the "Roaring Twenties") were a time of affluence and optimism. Americans spent like there was no tomorrow, snapping up all kinds of new innovations.
The stock market crash of October 1929 caused shockwaves of epic proportions. Within a few short years, gross domestic product plunged by 15%, crop prices fell by 60%, and unemployment rose to 23%. Those who were fortunate enough to remain employed often had their hours reduced or wages cut.
It wasn't just farmers and blue-collar workers impacted by the economic crisis. According to History.com, doctors and attorneys experienced income drops of as much as 40%, and families who once felt financially invincible faced ruin.
The shared suffering led to a famous Depression-era motto: "Use it up, wear it out, make do, or do without."
Many decades later, those of us fortunate enough to have grandparents still around from that time realized there was something a little odd about them. They wasted nothing, were disgusted by grandchildren who threw away half a meal, and enjoyed few things more than finding a bargain -- even if they appeared to have plenty of money in the bank.
Those thrifty characteristics probably did not stick with all Great Depression survivors, but they did serve as evidence that not everyone just "gets over" financial trauma.
COVID-19 made many of us afraid to leave homes, and with good reason. As of this writing, there have been nearly 8 million confirmed cases in the U.S., and 216,000 Americans have lost their lives to the virus.
By June, almost 30 million Americans had lost their jobs due to COVID-19, and 26% of Americans reported that they or a family member had gone without meals or relied on charities to fill the pantry.
Unless you live in a bubble, it is virtually impossible to pretend that the world has not been turned inside out. No matter what you've been through or are going through, there are concrete steps you can take to feel financially secure again.
When the pandemic subsides, you will never forget the impact of COVID-19 on you or the people you care about, but you have no power over the past. The best plan is to stabilize your finances so you can weather whatever comes next.
If you took out personal loans, used your credit cards, or borrowed from retirement to get through COVID-19, job No. 1 when you get back to work is to pay those debts off. If you have many debts, the debt snowball or debt avalanche methods can help you knock them out one at a time.
Even if you are 30 years away from retiring and moving to Paris to become a painter, recognize that time is your friend -- due to compound interest, anything you invest today is likely to be worth far more in the future. For example, if you manage to invest just $250 each month in a financial instrument paying an average annual return of 7%, the investment will be worth $41,449 in 10 years. In 15 years, you'll have $75,387 invested, and in 30 years, it will amount to an impressive $283,382. Not a bad return on $250 a month.
Bad things are going to happen, no matter how tightly we hold to the idea that life from here on will be smooth sailing. Some of us will get sick and be hit with ridiculous medical costs. Others will lose their businesses or jobs. Some will go through a divorce they don't want.
There is power in accepting that the human experience includes hardship, and part of accepting it is preparing for the day a storm hits. That means putting enough money into an emergency savings account to get you through an illness, job loss, or even just having a vehicle in need of repair. It means having money set aside to keep you stable if a relationship ends or the roof blows off your house during a storm.
There's been too much tragedy in the past year to say that we've been lucky, but we have thus far survived a once-in-a-lifetime event. If we're going to be changed by it, why not try to make sure it changes us for the better?
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