I’ve seen several references recently that “if we are in a recession it could be as bad as ‘81-‘82”. I first noted that he said 1982, not 1929. Then I had to think for a second…where was I in 1982? That year was one of my “transition points”. You know, one of those watershed moments when your life changes forever.
I was fired from a job as a convenience store manager in November, 1982. I was a single mom and didn’t qualify for unemployment benefits because I had been “let go for cause”. This called for drastic measures. I don’t even know how I got through that first month because, like so many 25 year olds, I had a nice car but had managed to save nothing. I remember I got rid of the car immediately and bought something cheap that barely met my transportation needs. And we ate lots of soup.
After about 6 weeks, I did find a job as a bartender, working from 6 p.m. to 2.a.m. A less than ideal job for a single mom. But it kept a roof over our heads and food on our table. I’m sure we had a very lean Christmas that year, but my daughter doesn’t seem to be traumatized for life by it. I kept looking for another job over the coming months. But it was now 1983 and times were tough in small-town Iowa.
If you remember the early 80s recession, the banking sector was hit hard. Prime rate hit 21.5% in June 1982, leading up to the S&L Crisis and the Farm Crisis. Unemployment in Iowa was at an all time high of 8.5% - a record that still stands today. Times may have been tough, but I still believed things would be OK. After six months bartending, however, I started to reevaluate my life: I didn’t really have any education beyond high school and I didn’t have marketable job skills other than the fact that I had been a manager for 4 years.
My brother had recently finished a stint in the Air Force, moved back home and was going to the community college. He encouraged me to look into college myself. I was certain I could never afford it but I did some checking and found wonderful grants and programs available. So at the ripe old age of 26, as a single mom of a 7-year old, I strapped on the backpack and took the academic plunge. My life changed forever. I got my Associates degree in Consumer Finance and my BA in Accounting, graduating in four years with highest honors. It was hard work, often working 2 jobs while going to school full time. But I would not trade a moment of it. And it would not have happened if the economy had been booming.
My point is, that yes, times right now are tough. But let’s keep it in perspective. There are many young adults in their 20’s who have never known anything but a prolonged economic boom. Anyone over the age of 40 remembers the early ‘80s and guess what: we survived. It was hard for a lot of people. A lot of banks failed. A lot of families lost their farms. And some people lost their homes. But this great country is still here. We will always have economic cycles…it’s the nature of capitalism. The current economy will rebound. As a society I think we’re learning to be more financially responsible. That’s a good thing. If you’re just starting your financial journey, I’ll share some of the lessons I learned in 1982 that I have carried with me to this date:
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Always have a little money in savings. Experts say you should have 6 months income in an emergency fund. That sounds daunting, but you have to start somewhere. If you need help saving, GMFCU can help with our Automatic Savings Account.
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Don’t use a credit card unless you can pay it off in the next month or two. The fact that I had no debt besides my car payment was a big reason that I made it through the tough times.
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Why buy New when Used will do. A new car can lose 20%-30% of its value when you drive it off the lot. Unless you’re planning to buy a new car and drive it until the wheels fall off, let someone else take the first hit on depreciation.
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Learn the difference between “needs” and “wants”. If you are determined to live within your means, you will need to learn to say “no” to yourself. That daily Starbucks adds up. Spending $15/ week versus saving $15/week at 4% interest adds up to difference of $17,384 after 10 years.
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Always know that you are not above losing your job or having a medical crisis. A failure to plan for the worst can leave you devastated.
Those are five basic principles to get you started on the path to financial independence. When we hear from members with serious financial troubles these days, they didn’t get there by choice; a medical crisis, illness, divorce, job loss or some other unplanned event pushed them over the edge. A few years ago, you could sell your house and get out from under payments you couldn’t afford…and maybe even pocket some profit. That isn’t the case today. It can take months to sell a house, and you probably won’t see much profit. So do you plan to be financially independent? How are you building an emergency fund? Or are you just buying that weekly lottery ticket, hoping that you’ll win big? If you need help getting started, check out your credit union at gmfcu.com.
