Have you ever thought what it would look like if you had to modify your spending and start budgeting during a crisis?
I teach a personal finance class for home schooled high school aged students. This week we got to talking about The Great Depression.
I’ve done quite a bit of reading on this pivotal event in time. If you haven’t, you should. There are some amazing stories on the web as to how people survived and thrived during the Depression.
Which got me to thinking………..
Table of Contents
You Never Know When the Tables Are Going to Turn Financially
Things are feeling a might unstable in the U.S. right now. There’s a huge divide between political sides, fueled by a media who thrives on chaos and violence.
Many of us have been budgeting during a crisis for the past several months. Others are thriving. But that’s no guarantee that the U.S. won’t fall into a nationwide financial crisis again.
The decade preceding The Great Depression was called The Roaring Twenties. People were living large.
They were making money off the stock market and spending it on big ticket items. Dancing, drinking, partying, socializing, and new cars were all the rage.
As were bigger, fancier houses. Then the roof caved in–and fast.
There are a couple of theories as to what caused The Great Depression.
One is that a large-scale loss of confidence in the economy caused a sudden halt in demand for consumer items and a sudden decrease in spending.
Another theory is that a normal, cyclical recession caused a huge wave of money hoarding which then triggered The Great Depression.
Regardless of the cause, the result was the same. Income decreased big time, leaving most everyone struggling to pay the bills.
Economic Stats of The Great Depression
The impact on society was devastating. Consider these Great Depression economic facts:
- unemployment peaked at 25%, in some neighborhoods it was as high as 40%
- more than 5,000 banks failed
- at some points over 1,000 homes were being foreclosed on every day
The ability to pay mortgages and car payments went out the window, and many people struggled to keep food on the table.
Children were sent away to live with relatives or find work to either support themselves or help support their families.
By all accounts I’ve read, it was awful except a small percentage of people who’d been financially prepared beforehand.
They survived–and thrived–during the Great Depression. They bought land, homes, and goods from struggling families for pennies on the dollar.
And you can’t blame them for “taking advantage” of the situation. The families needed to sell and were desperate to get whatever they could.
Those who were financially secure simply took advantage of a deal presented to them.
Of course, there were those who truly did take advantage of the poor. But you can’t force people to behave nicely.
What you can do, however, is to put yourself in a situation where if the crap hits the fan in this country you’re set up to be able to make it.
Budgeting During a Crisis: Avoiding Personal Economic Collapse in the Face of National Economic Collapse
Most of the information in this section is probably stuff you’ve heard before. I’ll put a new twist on it to the best of my ability.
Stop Spending When Budgeting During a Crisis
Budgeting during a crisis takes some serious work. If you need to prepare for economic collapse–or if you’re already there–the first thing you need to do is stop spending on anything that’s not a necessity.
- cancel the gym and other memberships
- eliminate or reduce your car payment by paying it off or selling it for a less expensive car
- go on a power trip to use less power and water, lowering your utility bills
- shop around to get lower prices on other stuff such as car insurance and homeowners insurance
- stop going out to eat and hitting the clubs
- cut down on alcohol, beauty and other expensive purchases
And make a bare bones grocery budget. One time after my parents were first married they had a really tight month. I’m not sure what led to it, but I know they had $10 to feed them for a month.
They sucked it up and bought a giant box of macaroni and a giant block of cheese, and they had mac and cheese for every meal for the next month.
It took my mom years before she would eat macaroni and cheese again. But they made it through the month in cash.
Get serious and stop worrying about what you want. It’s time to do what needs to be done.
Sell What You Can Sell
The next step is, if it’s serious, to sell what you can sell. All those little extras in the house; get rid of them.
Put them on Craigslist and get as much cash as fast as you can.
Go About Increasing Your Income
The next step is to increase your income. Pick up another (or a second or third) job. Start side hustling.
Talk to your boss about overtime or a promotion or a raise. Search online and do whatever you need to in order to make more money.
Pay Off Your Debt
And if possible, after you’ve got a good savings account cushion use your extra money to pay off your debt super fast.
Get rid of small balances first, using a debt snowball type of system to eliminate debt.
Be Willing to Sacrifice When You’re Budgeting During a Crisis
Possibly the biggest key to successfully budgeting during a crisis is to be willing to sacrifice. People living through The Great Depression did some crazy things to be able to survive and pay the bills.
They lived off of gardens they grew in their yards. They bought chickens and sold eggs to their neighbors.
I know one family that moved back in with their parents and lived with their eight kids in the family chicken coop. They lived that way for several months until they got back on their feet.
They had a strong determination not to “mooch” off their parents so they wouldn’t live in the house and they wouldn’t take any food from their parents (who were also struggling).
One of the kids, now in his eighties, talks about eating bullfrogs they found near a pond.
Other families took in boarders to earn extra money. They gave up their bedrooms and slept in the attic or basement or garage.
In other words, they did what they had to do and they didn’t make excuses.
Budgeting during a crisis means doing what you have to do to make it through.
Things Will Get Better
All of these ideas and sacrifices might seem difficult. And they probably will be.
But history has proven that tough financial times don’t last forever. They come and they go.
Your job is to prepare for the worst and expect the best, doing what needs to be done.