Great Depression

9 Money Lessons to Take From the Great Depression

Paul Michael — Wed, 25 May 2016 10:30:05 +0000

Lasting from 1929 until 1939, the Great Depression was the deepest and longest-lasting economic downturn of the 20th Century. Unemployment went as high as 25% in the U.S., over 5,000 banks failed, and hundreds of thousands of Americans became homeless. Extreme situations call for extreme measures, and that's when everyone looked at ways to cut back, save money, and survive. Here are nine tips from that era that are still just as relevant today, and can save your household a lot of money.

1. Waste Not, Want Not

The definition of that proverb is, "if you use a commodity or resource carefully and without extravagance, you will never be in need." In other words, don't waste anything and you'll always have enough. That was something people from the Depression lived and breathed daily, and yet in today's throwaway society, we are often guilty of ignoring it. How often do we all throw away leftovers, or even dump the chicken carcass once the meal is over? Get into the habit of using every part of everything that you can. A great stock can be made from chicken bones. If you use a juicer, put the pulp left behind into muffins and breads. And when your t-shirts are ready for the trash, cut them up and use them as rags.

2. Pad Your Ground Beef Meals

The cost of one pound of ground beef is currently hovering around $4, with grades like 93/7 (which means 93% lean, 7% fat) running $5-$6 per pound. However, the cost of a pound of lentils is significantly less, with most grocery stores having one-pound bags for under $2.

During the Depression, it was common practice to pad out ground beef meals with filler, like lentils or oatmeal, and if done correctly, the taste difference is subtle. If you're making meatballs, add more breadcrumbs. Interestingly enough, the humble British Yorkshire Pudding was used as a substitute for meat during the wars, when rationing made meat very hard to come by (and costly when available).

3. Stop Replacing, Start Fixing

It would have been unthinkable in the 1930s to replace a broken or malfunctioning item without first trying to fix it. But these days, with the price of so many items being very affordable, it's easy to just throw the broken thing away and buy a new one. Well, stop. You happen to have the greatest possible resource at your disposal: the Internet. Whatever is broken, from a toaster to a laptop, there are hundreds of online tutorials available in both written and video form. Some of them go step-by-step with photos, through every single part of the process.

If your lawn mower refuses to start after the winter, don't just throw it away and buy a new one. A simple tune-up kit costs $20 and could get it back on its feet. An ice maker in the fridge can be replaced by you, with parts available online for a lot less than a plumber would charge. Get into the habit of fixing things first. Then, if you can't do it, hire someone who can (if it's cheaper than replacing it). Only buy a replacement if all other options fail.

4. Grow Your Own Food

Sure, the grocery store is nice and convenient, but you can easily grow a lot of fresh fruit and vegetables yourself at a fraction of the cost. There is even a "grow your own food" movement, with thousands of people converting some, or all, of their backyards into fruit and vegetable gardens. Self-sustainability is not only cheaper, but important, should anything ever happen to the foods you take for granted.

Start simple with potatoes, tomatoes, peppers, herbs, and blueberries. When you get confident, and have a great crop, expand to beets, lettuce, cucumbers, cabbages, rhubarb, and strawberries. Of course, where you live in the world will dictate the kind of success you have, and what you can grow well, but there are also products that can help. A greenhouse can help you weatherproof your crops, and you can also grow inside with the help of indoor cultivators. (See also: 7 Fresh Veggies You Can Grow From Kitchen Scraps)

5. Don't Buy Anything You Can Make Yourself

There are plenty of items you can make at home, using raw materials and a little skill. For instance, several cheeses (including cottage cheese and fresh mozzarella) are very quick and easy to make at home, and cost far less than they do in the store. They're also fun to make. Yogurt is also very simple and easy to make. Then there are breads, cakes, pastas, and even beers and wines you can make yourself. Back in the Depression, it often wasn't an option to go to the store and buy whatever you needed. It's all too easy to pop to the store, but you will save a lot of money doing it all yourself.

6. Layer Your Clothing

It's not always an option with small children in the house, but if you do have the opportunity to do it, layering is far cheaper than heating the whole house. Wear several layers in cold weather, and set the thermostat between 50-60ºF during the hours you sleep. Put extra blankets on the beds, too. If you're watching a movie with someone, huddle up together in a blanket together. Do whatever you can to warm your own body without paying to warm every room in the home. You can also invest in a small heater that you can take from room to room. Use a hot water bottle, or an electric blanket. It may seem very frugal, but when money is tight, it can vastly reduce the heating bill.

7. Buy Used, or Even Get Things Free

There are so many avenues open to you to save money on used items. From clothing and furniture, to electronics and accessories, you can get excellent used goods from thrift stores, Craigslist, local classified ads, eBay, Amazon (look for the "used" option), and even friends and neighbors. It's often great to host a get-together and bring clothing that you can swap, either for yourselves or the kids. And don't be ashamed to seek free items. Dumpster diving, also known as freeganism, can bag you an incredible amount of perfectly good food, clothing, and furniture without spending a cent.

8. Buy Essentials in Bulk

It is much cheaper in the long run to buy the things you use week in, week out, in bulk. Stores like Sam's Club and Costco make it very easy for you to load up on soap, flour, toilet paper, canned goods, coffee, diapers, cleaning supplies, and pet food. This dramatically reduces the "unit cost" of the items, saving you money over time.

However, there are a few warnings that come with bulk buying. First, when you initially bring home some of these things, it's very easy to dig right into them. You must have willpower and proper rationing to make it work. And second, don't be tempted to buy bulk items that are not going to be used often. Remember Kramer in Seinfeld, buying industrial-sized cans of beefarino? Not a good idea.

9. Learn to Go Without

What do you want, and what do you need? The two are very different. With the availability of credit cards and loans, it's easy enough to get the things we want and pay for them later (at additional cost). But before bringing out the plastic, or diving into savings, consider the want vs. need argument. Do you really need that new watch or pair of shoes? Do you need all the channels on cable TV? Do you need a new car? Do you need 14 different flavors of soda in the pantry? What can you do without, and still live a life you consider happy and comfortable?

What other Depression-era hacks can we still use today? Share with us in the comments!

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This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Reasons to Stay Calm When the Market Tanks

Tim Lemke — Fri, 25 Sep 2015 13:00:38 +0000

The month of August was no fun for investors, as news from a slowdown in the Chinese economy caused the U.S. stock market to have several of its worst days in years.

It seems likely now that 2015 will be a mediocre year at best for anyone who invested in stocks. But the stock market does take a tumble from time to time, so it's important to remember these reasons why you should not freak out when it does.

1. It Always Goes Back Up

If you're upset to see the market drop, you should be encouraged to know that it always has risen back up to new heights. In fact, almost every down year of the S&P 500 has been followed by a year with better-than-average returns, according to data compiled by NYU's Stern School of Business. A 3% decline in the S&P in 1990 was followed by a 30% rise in 1991. A 24% drop in 1974 was followed by a 37% rise in 1975, and another 23% rise in 1976.

And what happened after the market tanked in 2008 and 2009? Well, it took a while, but all losses from that drop would have been regained by 2012, and the market continued to rise for three more years after that. If you panic and sell when the market drops, you miss out on these gains.

2. Most Market Corrections Aren't That Bad

There's no doubt that some market crashes cause a lot of pain. But not all drops in the market resemble those of 2008-09 or the Great Depression. An examination of the top 20 one-day losses by percentage of the Dow Jones Industrial Average shows that nearly all took place around the financial crisis of the last decade, the Great Depression, or immediately after the market re-opened a week after the terrorist attacks of September 11. In other words, the big and painful drops only come around once in a generation or so. The rest are relatively modest and manageable dips.

3. It's Bargain Time!

Haven't you ever wanted to buy some shares of Apple, but didn't have the cash? Well now is your chance! Usually, when the market takes a dive, it's a chance to buy shares of some very solid companies at a great value. If a company's fundamentals are strong, you should not be wary of investing in that company simply because the broader stock market is down. Lower prices equal an opportunity for profits. (Note: At the time of this writing, Apple is trading about 18% off its 52-week high.)

4. Corrections Are Often Healthy

Big drops like the one we saw in 2008 can sometimes be the result of a major problem in the financial sector. But usually, the market dip comes because valuations of companies were out of line with earnings. When the market is "fully valued," it's hard for investors to find reasonable prices for stocks, and new investors are reluctant to enter the market. Any drop of less than 10% is seen as healthy under these circumstances, and it can help avoid a much larger and painful crash later.

5. You've Planned for It

If you're close to retirement, you likely already adjusted your portfolio to more conservative investments including bonds and cash. If you have many years before you retire, then you have plenty of time to make up losses and can benefit from buying low now. Don't stress. These types of market downturns were all factored in when you started investing.

6. The U.S. Economy Is Still Healthy

The stock market and the economy are two different things. Sometimes, the stock market will struggle due to underlying economic problems in America, but often a market dip is related to broader global issues, or even a bad news event. Consider that the most recent market correction took place at a time when the unemployment rate is at its lowest rate in seven years.

7. Bonds Prices May Go Up

When stock prices go down, bond prices usually rise. And this is good for bondholders who may be looking to cash out. Higher stock prices do hurt bond yields, but this is not an issue for current bondholders who have interest rates locked in.

8. It's an Opportunity for Tax Loss Harvesting

If you sold some stock earlier in the year and were expecting to pay some capital gains tax, there may be a chance to offset those gains by selling some securities at a loss. It's not always a great idea to sell stocks if you think they'll rise again, but this is one strategy to avoid too much tax.

How did you weather the most recent stock market storm?

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Best Money Tips: Frugal Depression-Era Habits to Pick Up

Amy Lu — Tue, 03 Feb 2015 20:00:13 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some great articles on frugal Depression-era habits, the emotional side effects of debt, and tips for knowing whether a good deal is a smart purchase.

Lessons From My Frugal Father

Kentin Waits — Fri, 06 Aug 2010 13:00:15 +0000

My dad was 12 years old when the first waves of the Great Depression spread across the country. A modest but thriving farm insulated his family from the worst of the effects, but this period still defined his approach to money management and influenced nearly every aspect of his lifestyle.

When I was a kid, I skipped most of the usual rebellious attitudes about thrift and simple living. I wasn't elated that we had a smaller house, that my dad and like-minded mom controlled all the finances with a surgical precision, but I vaguely realized they had a goal and a focus that I might benefit from someday. At the risk of dating myself, I remember wanting a pair of parachute pants so badly and for so long that by the time I could finally buy a pair, wearing them would have seemed ironic.

Now, decades later, I look back at my childhood and see the simple, direct, conscious attitude that drove my parents' financial decisions large and small. They had a goal, they discussed it, they kept the goal in focus and their biweekly paychecks weren't occasions for temptation, but little task-master reminders. With the perspective that only 30 years' worth of hindsight can give, I've filtered my dad's financial priorities down to five principles that are worth a review today:

Keep A Garden

Next door to my childhood home sat an empty lot that the city begrudgingly maintained because of absentee owners. My dad located the owners and offered to take care of the lot in exchange for permission to plant a garden on it. This large, ambitious garden thrived and supplied our family with dill, radishes, potatoes, cucumbers, lettuce, onions and corn for nearly 15 years. Everyone had a hand in planting, watering, weeding and harvesting what came out of that garden. It put us in control of a major portion of our food supply and was organic, sustainable and local before those concepts were cool. The positive effect on our food budget was nearly an after-thought.

Know Where Your Money Is

I have a perpetual visual memory of my father sitting down every evening and reading the paper in his recliner. About once a month or so, he would skip the paper and pull out a little 3" x 5" notepad and add up his net worth. He did it all by memory and line-itemed each savings account and investment that he and my mother contributed to and the corresponding balances. His accounting methods were rudimentary by today's standards, but he knew where his money was. That simple little notepad told him all he needed to know and was another tool he used to keep himself focused.

Take Care Of Your Stuff

Working in the garden took hoes, rakes, shovels, tillers and other implements that my dad was charged with taking care of. They each got the Dad Treatment of a thorough wash and a thin coat of oil on any metal parts to prevent rust. We sometimes joked as kids that if we stood still too long, we'd get washed, covered with a thin coat of oil and hung on a peg board. He took care of his tools, his cars, his clothes — anything that he had invested in was meticulously maintained in order to extend its service. So much is expendable today that often this concept gets lost in the wash of new products we have to choose from.

Avoid Credit

When I started college and fell victim to those on-campus credit card solicitors, my otherwise fairly silent father had a few things to say. While I thought quick credit marked my entrée to adulthood, my dad reminded me of his credo: if you can't afford to pay with cash, you can't afford to buy it. I've since modified his approach a bit, but I do use credit extremely conservatively and am constantly amazed at how cash-poor most of my contemporaries are. When my parents had a new large purchase to make, they added a savings 'account' on that little 3" x 5" notepad and saved until the item could be bought outright.

DIY

My dad had an amazing engineering gene that the DNA lottery has denied me. When something broke in our house, he instinctively knew how to fix it. If the blender stopped blending or furnace stopped heating, he could identify the specific failed part and replace it. In his more amazing MacGyver moments, if the part couldn't be purchased, he would craft it himself with a grinder or welding torch. Now, I don't own a welding torch and trying to mill a gear from an old washer would send me straight to the ER for nerve pills. But the spirit of his approach isn't lost; I can patch a leaky garden hose and replace a wax seal on a toilet (thanks, Dad). Doing tasks himself saved my dad money, probably entertained him to a certain degree and constantly expanded his range of skills.

When I look back on those years with dad, who passed away in 2001 at the age of 84, I think of the quiet lessons he taught by example. Especially now that the world is talking about simplicity and savings and living within more modest means, I've come to treasure the images of that little 3" x 5" notebook, the bushel-baskets full of produce from our garden, those perfectly hung tools gleaming rust-free on the basements walls. He was a man ahead of his time.

This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Stag-hyperinflation?

Philip Brewer — Tue, 24 Mar 2009 16:15:48 +0000

Stagflation, the bane of the 1970s, is pretty much the worst situation for ordinary folks. With the economy depressed, jobs are scarce for workers and profits are scarce for business owners. With entrenched inflation, everyone's savings are constantly eroding. The result is that nowhere is safe for your money: not cash, not your business, not the market. With the latest moves by the Fed, I fear we're facing a repeat--only it'll be worse this time: stag-hyperinflation.

We know what produces inflation: excess growth in the money supply. This was a matter of some dispute back in the 1970s. In those days, many people thought that government deficits were the culprit--that when the government borrowed money and spent it on stuff, the "excess" demand bid up prices. The experience of the 1980s proved otherwise: Strong measures to hold the line on money supply growth by the Federal Reserve under Paul Volker brought inflation under control despite record deficits.

Bringing money supply growth down to the level of economy growth will bring inflation to a stop. However, it will also produce a recession. (This is pretty much inevitable. The inflation, by producing the illusion of growth, will have fooled businesses into making unwise investments. When the growth fails to materialize, businesses that expanded will have to contract--which is exactly what a recession is.)

Just as we understand inflation and recession, we also understand stagflation. You get stagflation when you repeatedly try to bring inflation down, but then keep chickening out at the first whiff of recession.

Unlike in the 1970s, our current spot of trouble was kicked off as an old-fashioned financial panic, which is a deflationary event. A year ago, I was worrying about inflation. (I wrote about How to live with inflation and Budgeting in a time of inflation and Will high inflation persist.)

By October last year, though, I had figured out that the deflationary effects of the financial panic were going to squelch the inflationary effects of Federal Reserve policy. (I wrote a post called Inflation is going away for a while.) With economic activity plummeting, prices of global commodities fell as well. Consumers trying to pay off debts and boost savings kept a lid on prices of consumer goods as well.

(As an aside, it's worth emphasizing that not all price increases are inflation. Inflation is the money becoming less valuable. Sometimes, though, prices go up for other reasons. Resource depletion makes key resources more expensive to produce, pushing up the prices of raw materials, and eventually the prices of everything made with those resources. Globalization pushes down the prices of things available in global trade, making things that are only available on local markets relatively more expensive. People's tastes change, producing changes in relative prices. All of these things can look like inflation, if all you've got to go by is price statistics.)

The Federal Reserve is in a tizzy. They're terrified of deflation--money becoming more valuable--because the experience of the Great Depression shows that a deflationary collapse can not only bring down the whole economy but keep it down for years. Contrariwise, they know how to stop inflation. This asymmetric situation has prompted them to boost the money supply in an effort to create a modest amount of inflation.

Normally, the Fed can create inflation no problem--they create additional bank reserves, the banks lend more money, the money supply goes up, and you've got your inflation. (It shows up in prices when people spend the borrowed money--prices get bid up because there's more money but no more stuff.) Just lately, though, this mechanism hasn't worked well, because the financial crisis has broken the transmission mechanism at the step of "the banks lend more money"--the banks are bust, so they're not lending, consumers are bust so they're not borrowing (and the ones who would borrow are poor risks for paying the money back), and businesses staring into the economic abyss are not borrowing either.

Faced with that problem, the Fed has now brought out the big guns. Last week the Fed announced that it was going to buy "up to $300 billion of longer-term Treasury securities over the next six months." Because here's the thing--there's one entity that can and will do the necessary borrowing and spending to produce inflation: The US Treasury.

That $300 billion, plus another $1.55 trillion spent on US government agency securities, are guaranteed to work their way through the economy and produce some inflation, pretty much ending the risk of deflationary collapse.

The questions then become, "How much inflation?" and "What next after that?"

How much inflation?

Nobody knows. It's impossible to even guess. The Fed's governors and the presidents of the individual reserve banks do make projections (for what they're worth, they recently projected inflation of 0.3% to 1.0% in 2009 and 1.0% to 1.5% for 2010), but their projections are no more accurate than anyone else's--which is to say not accurate at all.

It's easy to say what they're trying to do. They're trying to offset the deflationary impact of the financial crisis. And, because they know how to stop inflation, they're willing to aim a bit high--they want to be sure that they're entirely offsetting the deflationary impact, and they're willing to risk an accidental inflationary surge. They view the downside risk in that direction as much smaller than the downside risk of an accidental deflationary spiral.

The problem is that they could easily overshoot much too high, producing inflation on a scale that trashes the whole economy. (Inflation of just 10% wreaks drastic havoc with a modern economy. It becomes impossible to make any sort of long-term plan, because there's no way to know what the money will be worth a few years down the road.)

What next after that?

Yes, the Federal Reserve knows how to stop inflation--by causing a recession. Of course, we've already got a recession. Unfortunately, the process doesn't work in reverse: Being in a recession doesn't prevent the next round of inflation.

What we're looking at now is ameliorating this recession with a burst of inflation, in the hopes that doing so will keep it from turning into a depression. At that point things can go one of three directions:

The inflationary burst falls short and the deflationary spiral continues in earnest (The Fed's latest move signals that they'll do whatever it takes to prevent this scenario.)
The inflationary burst is "just right," halting the deflationary spiral without pushing inflation up to levels that threaten the economy. (This is what the Fed is trying to do. Let's all wish them luck.)
The inflationary burst is excessive, producing a serious bout of inflation. (There really isn't an upper bound here. Just a few percent does serious harm to the economy, but 10%, 50%, 10,000% and more have all been seen in various places around the world, over and over again since the invention of paper money. In 1979 and 1980 the US saw inflation rates over over 1% per month, which is plenty to wreck individual household budgets.)

If the inflationary burst turns out to be excessive, the Fed will reduce the rate of growth in the money supply to bring it back down, but we know what that does--it produces a recession. Maybe that recession will be different from this one--specifically, maybe it won't come hand-in-hand with a collapsing financial system--in which case maybe the Fed will stick to its guns and grind the inflation rate back down low enough that its economic effects are minor. But I don't see much reason for optimism. First, we'd have to fix the financial system between now and then--and there hasn't been much progress on that front so far. Second, a solid majority of the policy-setting Federal Open Market Committee members would have to grow a pair, and I'm not too hopeful about that either. The upshot is that I foresee inflation followed by a half-hearted attempt to rein in money supply growth, followed by more inflation.

And, to bring things full circle, we know where that leads. If you want stagflation, all you need to do is try to bring down inflation and then cave in at the first signs of recession. Kick the inflation rate up nice and high first and you can legitimately call it stag-hyperinflation.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Placing Prepositions: Where you from? Where you at?

Jabulani Leffall — Sun, 15 Feb 2009 22:18:45 +0000

She’s shakin’ what her mama gave her. He’s stuntin’ like his daddy. Man you’re the spitting image of your mother. Wow, temper like his father.

We hear different variations of these comparisons and contrasts all the time, linking us to our predecessors and ancestors. To say nothing of what we look like, so much of who we are is wrapped up into where we came from. This is true across the board and not just geographically, but psychologically, anatomically and physiologically.

For every story about a person who comes from humble beginnings, is the first person to go to college -- blah, blah, blah -- there are 10,000 stories about someone failed by inclination, chasing the same dreams and nothingness as their parents. Just as some parents live vicariously through their children, many children seek to correct past mistakes and distance themselves from antecedents and in doing so, trip the switch that makes them what they loathed or feared.

Okay, Okay I know, paging Dr. Point, Mr. Premise B. Please is here for his appointment. Here goes: carrying both the stain and shine of those who physically and scientifically gave you life can have either a devastating or complementary as well as complimentary effect on your attitudes toward money. This includes splurging and pinching, spending and saving, growing and blowing.

For instance, members of the so called “Greatest Generation,” who were teenagers during the "Great Depression" and then went off to fight fascism and foriegn imperialism, came home to the G.I. Bill and came to value family, normalcy and growth. Those before them had been parents during the depression and probably had a mistrust of financial institutions, picked up every penny they saw and stowed it away, re-sewed their clothing, pitched in with neighbors, learned the value of money, scrimped and saved.

The baby boomers that followed were the first to have a sense of entitlement, the first to be proud, television-watching, interstate-traversing members of a lone industrial and military superpower. And naturally their kids, with Speak ‘N Spells, Cabbage Patch Dolls and much later, $100 sneakers, went forth into the world with skewed biases and unprecedented demands.

What we are today are walking subjects of an experiment in marketing, consumerism and calamity in the post-nuclear, post industrial, pre-singularity age. If sociological ramifications weren’t enough -- say a mother buying a leather coat instead of paying the light bill or a father who lost his shirt trying to flip a house – it has recently emerged that our different strokes when it comes to attitudes toward personal finance may be nothin’ but the genes.

As part of a social and scientific micro test, Northwestern University finance professor Camelia Kuhnen gave her students a certain amount of money to make as many as 96 separate investment choices. Once the eager students’ pockets were fattened, she told them to say "ahhhhhhhhh" and got some DNA from their saliva. What resulted was that students who carried specific variations of certain genes and had certain balances of dopamine and serotonin, made risky investments -- 25 percent more of the time than those without these genetic traits.

Interesting stuff, yet we know that the world don’t move to the beat of just one drum. Even with the findings from Kuhnen’s “The Neural Basis of Financial Risk Taking" and other experiments, the question remains: How would Arnold Jackson have faired if not for Phil Drummond or would he have been fine? (Let that marinate).

In the end, Kuhnen said in an interview on the public radio program Marketplace that based on her findings, only 30 percent of “variation in risk-taking behavior is due to our genes.” The other 70 or so percent is based more on sociological stressors and stimuli such as cultural heritage, region and neighborhood or perhaps whether your father carried money in rubber bands, in a wallet or disbursed expenditures using a pen or computer.

When managing our money, these are not things that should keep us up at night but are definitely factors to consider. Are you doomed to repeat the past that came before your existence? Are you making your family proud with wise bread traits? Or is it something intangible? Can you simply not help buying the limited edition copy of Halo, those sleek, jet-black, Salvatore Ferragamos or the new fourth-generation Pomegranate phone that allows you to make coffee, shave and play the harmonica. All this despite the fact that your student loan and credit-card balances are gaining more interest than if Rihanna, Britney, Paris and P.Diddy showed up at a House Banking Committee hearing.

What’s your motivation? This may be really personal. It may be gut wrenching. There may be an ugly truth you discover about your origin and how it informs your decision making, whether it compels you to be a miser or stunna.

What we should remember in the throes of self-examination puzzles such as these is that money squandered can be earned back by working harder, saving more, finding ways to improve our social and economic conditions as well as bring our wants into parity with our needs on this life’s Bell Curve. But as for time spent and wasted acting a fool with our dough, well, that’s history. Or is it?

This article is from Jabulani Leffall of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Five Frugality Hacks Straight Out of the Great Depression

Thursday Bram — Thu, 08 Jan 2009 17:33:21 +0000

During the Great Depression, simple frugality was the only way to get by. There was a saying that everyone lived by: "Use it up, wear it out, make it do or do without." There's a lot we can learn about frugality just by looking at how folks managed during the Great Depression — and those old-fashioned ways are starting to come in handy again as we all face this financial crisis.

Go In Together: If you can pool your money with someone else, you have more buying power. In many cases, that means you can get something cheaper. For instance if you can buy food in bulk, it's less expensive. If you need a tool or something else that you won't need every day, you can often go in together with someone else that needs the same thing, effectively halving the cost.
Do It Yourself: Pretty much anything is cheaper if you do it yourself, from home repair to cooking meals. Of course, the trade off is time, but if you have the time, it's worthwhile to learn to do as much as you can for yourself. I've been working on this one myself — I still probably shouldn't be trusted with any car repairs, but I no longer have to call someone in to do some of my minor home repairs.
Barter: Just because you don't have cash for a certain expense doesn't mean that you can't cover that cost. Instead, you can barter. Trade your skills for someone else's — maybe you need a babysitter and your favorite babysitter needs a professional haircut (or whatever your specialty happens to be). You can work out a deal where you both get you want without having to bring cash into the matter.
Go to the Source: Buying anything from its source is cheaper — food is especially so. If you can purchase from a farmer or through a farmer's market, you often pay less for your food because there is no middle man getting a cut of the cost. Prices are even better if you can become your own source — if you grow your own garden, the cost of your food can be minimal.
Reuse: We're used to throwing away all sorts of things that can be easily reused. From packaging materials to broken items, there's almost always some way that you can repair, reuse or repurpose anything that you're planning on sending to the dumpster. Clothing is a key example — it can often be repaired, handed down, altered, made into a quilt or even used as rags. There's rarely clothing that really ought to be thrown away.

There are far more approaches to frugality that were crucial not so long ago. There's plenty of room in the comments if you'd like to add your own.

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Survival Basics From Depression-Era Kids

Julie Rains — Fri, 31 Oct 2008 17:08:14 +0000

My parents and my husband’s parents were children during the Great Depression. Mine lived in large cities; my in-laws, small towns. Their families started this era from neither a position of wealth nor desperation; just to add perspective, though, I’ll mention that their parents wouldn’t have considered lack of indoor plumbing a sign of poverty, at least in their early years. Here are the basics of how they managed to survive using tactics that are still viable today.

1) Play outside.

Like most kids then, my dad spent his days when not in school outside playing with his older brother and the neighborhood kids. He did have to forgo riding on his tricycle after it was repossessed, but apparently found other things to do.

Outside play is generally free or cheap, even if it means driving to the playground. And, when I operated on a very limited budget in a small town right out of college, I spent much of my leisure time outside, usually hiking in the nearby mountains with friends. My favorite hikes were Stone Mountain (one of my mentions in things to do for $5 or less) and anywhere on the Blue Ridge Parkway.

2) Write letters.

My father-in-law's brother used to write letters for a hired hand who worked the same land as his father, a tenant farmer, did. Sadly, the hired hand couldn't read and write well enough to correspond with his girlfriends so he relied on someone else for his correspondence.

Margaret espouses the benefits of writing letters as a way to get attention from companies. It can also be a form of entertainment or pastime, and way to record one's history; my mother has letters from her mom and reading them makes me feel as if she is right next to me, sharing her story.

3) Keep your government job or any not-overly-exciting-but-stable position.

My mother-in-law’s dad was a mail carrier with the United States Postal Service (a government job) and so had a reliable source of income, unlike many of their neighbors. Her family was able to help others in their small, rural community.

I am sure that there are many exciting and well-paying government jobs but a key element of their attractiveness is stability. There is often a trade-off between the opportunity for higher pay in a risky environment and lower wages in a safer arena (consider looking for a new job if you have a low-paying position in a volatile environment).

4) Grow meals in the backyard.

My grandmother raised chickens in her tiny, urban backyard; when she was ready to fix dinner, she caught a chicken and cooked it. My mother-in-law’s parents had a garden on land they owned; everyone was encouraged to grow produce in order to feed themselves and sell the excess to neighbors, as the reliability of food distribution was uncertain.

The get-closer-to-your-food movement has been gaining momentum though many never abandoned this concept. My in-laws now have a farm in which they grow corn, potatoes, peppers, and more. My parents have always had tomato plants and my dad is an expert farmers’ market shopper, always investigating and committing to memory who is a farmer and who is a reseller only, who has the best _____ (peas, limas, cantaloupes, peaches, etc.) and who doesn’t.

Though I do have a few plants now, cultivating my backyard is one area that shows the most promise in saving money and living better.

5) Generate as much income as possible.

My grandparents took in boarders though my dad, still young at the time, didn’t really like having strangers in the house. My husband’s grandparents also had boarders but the kids, then young adults, enjoyed the company. At some point, both of my grandmothers worked outside the home to bring in money for their families.

Frugality can go only so far. Cold cash is often needed to pay for basic supplies, such as food and clothing, or make payments on credit-card debt.

6) Get government-sponsored training.

My father-in-law’s oldest brother joined the Civilian Conservation Corps. He worked and lived in a camp in Oregon, and learned job skills. Back home, he first worked as a candy salesman and then started an auto-parts store and trained his younger brother in business. Eventually, they both operated stores in small towns. My dad and father-in-law were fortunate to get a college degree on the G.I. Bill.

Today, taking classes at the community college is an inexpensive way to get work skills. Many community colleges also offer consultation for starting and running small businesses.

7) Stay put.

My dad’s parents lost their house to foreclosure. But, because no one else could afford to buy the home, they were able to stay in the house. They happened to live near the downtown area of a large city with work, schools, and stores within walking distance, so it made sense to stay where they were.

Paul explores the concept of not paying the mortgage in order to receive benefits from the government bailout though I wouldn’t recommend this tactic (not that he does either; he was just sparking discussion). What I have learned from this story is that there is not always a ready market for housing.

8) Move to where the jobs are.

My father-in-law’s family (his parents and brothers) moved to Newport News so that they could work in the shipyard (my father-in-law stayed back until he could finish high school and then joined them).

Obviously, this tactic seems to be in direct contrast to #7 and was useful only when World War II efforts began to stimulate the economy. But, having started my professional career during a recession, I’ll echo that moving for work, if you can afford the start-up costs or have even a basic relocation package (mine was 30 days in a hotel, allowing me to get a first paycheck and find a roommate before putting down a deposit on an apartment), makes sense.

9. Share. Having a home and a steady job allowed my mother-in-law’s parents to share with others; at some point, they gave shelter to a young woman in need.

Here are some things I’ve learned from Depression-Era Kids:

Save, and save more.
Invest.
Develop multiple streams of income.
There are risk and uncertainty everywhere, even with government-sponsored benefits and guaranteed returns.
When you retire, your job is managing your streams of income and investment portfolio.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: