The Great Depression was a difficult time for many people, but it also presented an opportunity to learn valuable lessons about surviving tough times.
Many of these lessons learned during the Great Depression are as relevant today as they were then. Frugal living is a lesson that can be taken away from this era. We never know what the future holds, so it's always wise to be prepared.
In this article, we will be sharing some of the best frugal lessons learned from the Great Depression era. With these lessons, you can save a few extra pennies and make your money go further!
1. Assess Your Current Financial Situation
The first and one of the essential steps to financial independence is assessing your current financial situation. Evaluate how much money you have in the bank, what debts you owe, and whether or not you are making enough money to cover your expenses.
This will give you a better understanding of where you stand financially and show you where there are opportunities for improvement. You can make better financial decisions and create a plan for achieving financial freedom.
2. Set Realistic Financial Goals
Having goals allows us to stay focused and motivated. Setting realistic goals can help you progress toward your financial freedom and keep you on track.
For example, if your goal is to save $10,000 in one year, break this down into smaller monthly goals of saving $833 per month. This will make it easier to reach the ultimate goal.
You may need to make some adjustments depending on your financial situation and goals. Remember that adjusting your goals is okay if circumstances change or you find yourself making more money than expected.
3. Diversify Your Investment Portfolio
Diversifying your investment portfolio is a crucial component of achieving financial freedom. Investing in different types of investments reduces your risk and helps you generate more income over time.
From stocks and bonds to real estate and precious metals, diversifying your portfolio can help you grow your wealth while reducing the chances of sustaining significant losses.
Create a portfolio that is tailored to your goals, and make sure you review it periodically. This will help ensure that your investments are performing as expected and allow you to make necessary adjustments.
4. Follow a Realistic Budget
Creating and sticking to a budget is an integral part of achieving financial freedom. Following a realistic budget helps you stay on track with your spending and savings goals and ensure that you are living within your means.
When creating your budget, consider all of your expenses (fixed and variable) and allocate enough money for each expense category. This will help you avoid overspending and save enough money to reach your goals on time.
Remember – creating a budget is easy, but sticking to it is the key to success – so be sure to track your progress and make adjustments as needed.
5. Limit Your Credit Card Spending
Credit cards are handy financial tools – they can be a great way to build your credit score and engage in cashless transactions.
But it can also be one of the quickest ways to get into debt if you don't use them responsibly. If you are tempted to overspend, it's time to limit yourself.
Make sure to use your credit cards only for emergencies and not for regular purchases. Instead, use cash or a debit card to stay within your budget. Doing this can help you avoid adding unnecessary debt and credit card fees.
6. Invest in Inflation Proof Assets
One of the biggest lessons learned from the Great Depression is that inflation can be a double-edged sword. Prices go up, but wages don't always follow suit.
One way to protect yourself from inflation is by investing in assets that are, for all intents and purposes, “inflation-proof” – like gold or real estate. These investments can help you build wealth over time and ensure your money stays ahead of inflation.
7. Create an Emergency Fund
Having an emergency fund is like having an extra cushion of financial protection.
If something unexpected happens – like a job loss, a medical emergency, or an unforeseen expense – having money on hand will help soften the blow.
Experts recommend setting aside enough money to cover at least three months of living expenses. This way, if something happens and you need funds, you will have a safety net to fall back on.
8. Don't Rely on a Single Source of Income
When the financial crisis hit during the Great Depression, many people found themselves out of work and struggling to make ends meet.
One way to protect yourself from a similar situation is to diversify your income sources. Having multiple streams of income can help you weather any economic storm that comes your way.
It may be hard work – but having multiple jobs, side hustles, or investments can help you stay afloat if your primary source of income is suddenly taken away.
Thanks to the internet, we live in an age where multiple income streams are accessible to nearly everyone.
So make sure you take advantage of it – because having a backup plan could be the difference between making it through a crisis or getting stuck in one.
9. Learn the Basic Personal Finance Skills
Although the Great Depression era was a time of severe economic hardship, it was also when people developed basic personal finance skills and techniques to stretch their limited resources.
Learning to budget, save, and invest can help you make the most of your money.
By understanding personal finance, you'll be better equipped to handle any financial difficulty or challenge that comes your way – no matter what state the economy is in.
10. Keep Yourself Updated and Informed
Finally, the last tip from the Great Depression era is to keep yourself informed. By staying up-to-date on current economic trends and news, you will be better equipped to know when to change your life or investments.
This will help you avoid any potential financial issues and put you in a better position to make sound financial decisions.
So take some time each day or week to read the news and stay on top of economic developments – it could save you a lot of trouble down the road.
This concludes our list of frugal tips from the Great Depression era. Although times may have changed, these tips are useful today and can help you manage your finances better.
Remember – being frugal doesn't mean sacrificing the quality of life; it's about making wise decisions with your money. So follow these tips, and you'll be well on your way to financial freedom! Good luck!
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.