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The other is the Great Depression the fallout when all thatprosperitycaught up with Americans.
Were in the 20s again, but few people use the words booming or prosperous to describe this decade.
Monitor Your Risk
The 1920s were a time of unprecedented prosperity.
One economist proclaimed that stocks had reached what looks like a permanently high plateau.
The markets success persuaded the non-wealthy tobegin investing, and banks took advantage by lending money to consumer investors.
Understand the risks of your investments, and only invest what you’re able to afford to lose.
Balance Your Portfolio
The 1929 market crash caused some Americans to lose everything.
People lost their life savings, and stocks became worthless pieces of paper.
Those who had invested with borrowed money were in debt.
Prices crashed all over the market, but the crash looked steeper for stocks that had been soaring.
The crash would have been unexpected and wiped out everything you had.
Working families could suddenly buy cars and access a standard of living theyd never experienced before.
There was no turning back.
Soon, people started financing all kinds of household amenities, from vacuum cleaners to furniture.
Everyone wanted to keep up with the Joneses.
Then, the Great Depression brought it all crashing down.
Banks protected their remaining assets and stopped lending to consumers.
Working people lost their jobs or saw their income drop precipitously.
Over the next four years, wage income dropped by 42.5%.
If you couldnt repay your loans, youd lose your house, car and whatever else you financed.
The Lesson: Only Borrow What you might Safely Repay
Debt and repossessionare still significant concerns.
In the 2020s, we know a job loss or financial crisis can happen to anyone.
Before signing any loan agreement, create a plan to pay it back, even if your income drops.
Spend Thoughtfully
Conspicuous consumption was a key driver of the1920s consumer lending boom.
Cigarettes, makeup and sized off-the-rack clothing made life more convenient and expensive.
Dont buy it if you cant pay immediately never overspend for a trend.
With less cash on hand, banks couldnt keep up with withdrawal requests.
In the next few years, 9,000 banks failed, and depositors lost $7 billion in savings.
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