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Baby boomers, who have experienced major financial hardship in the past, speak about surviving through a recession as it unfolds

An author and a financial planner gave their advice, which are insights from watching the challenges of the 1980s.



It was the era of the Cold War, big hair, and shoulder pads. Interest rates that would make you dizzy were another aspect of the ’80s that is often forgotten in the midst of nostalgic reflections.

Chartered financial analyst and investment manager at Georgia’s Wiser Wealth Management, Brad Lyons, estimates that interest rates began the decade hovering around 20%. Attempting to counteract inflation, “they had [raised them] dramatically in the late 1970s.”

At the outset of the 1980s, when we meet Lyons, he is a young man. Even though interest rates today are relatively low compared to the past, we can still gain valuable insight from those who have been through it.

According to the latest inflation data from July, consumer prices are 8.5% higher than they were a year ago. The rate was 9.1% in June. A rate this low hasn’t been seen in decades.

We’re in this for the long haul, and those who remember the ludicrously high interest rates that followed the high inflation of the 1970s advise us to buck up and practice fiscal restraint.

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For those of you who weren’t around during the ’70s and ’80s, you missed the Great Inflation

Experts have made comparisons between the current situation and the high inflation of the 1960s.

Low unemployment and the end of the gold standard (a monetary system in which currency is backed by gold) both played roles, but rising energy costs ultimately proved to be the final straw.

Due to the West’s support for Israel during the Yom Kippur War, the Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo on the region in 1973, nearly quadrupling oil prices. Inflation and stagnation both increased as a result of a chain reaction. Then, at the decade’s end, the Iranian Revolution caused oil prices to surge once more.

Inflation reached 14.5 percent that year, and joblessness reached 7 percent. The federal funds rate is now between 2.25 and 2.5 percent, but it once reached a whopping 17 percent.

Mike Drak, a banker at the time, recalls that the excessive interest rate made it next to impossible to get ahead financially. When he got his mortgage, the rate was 17.5%, he says.

Almost on a monthly basis, the interest rates were increasing, as Drak puts it. So, it was something that didn’t seem like it was going to end. In fact, I once declared, “I’d be the happiest person in the world if I could find one day where I could find a mortgage rate for 10%.”

Drak has written two books about retirement: Retirement: Senior contributor at Booming Encore, a financial blog catering to the baby boomer generation, and author of the book Heaven or Hell: Which Will You Choose?

Reduce your debt load

According to Drak, mortgage, credit card, and auto loans all increased at a rapid rate during that time.

“Those were trying, anxious times. However, we were in a fortunate position to be able to earn a living. That meant our income grew, albeit not at the same rate, and we both had to keep our jobs to keep up with our expenses and make progress on our debt.

He recommends paying down debt as one of the most crucial things to do in these interest rate hike times. His priority at the time was to make mortgage payments.

Due to the crushing interest rate and the desire to avoid becoming trapped, “you have to have a lot of discipline, you’d have to say I want to make lump sum additions annually on it.”

Particularly, Brad Lyons advises his audience to avoid getting into credit card debt.

“Pay off debt as much as [you] can,” he urged.

Debt reduction in the current economic climate may seem impossible, but the avalanche method and the snowball method can help.

Maintain Your Investments

While it may be tempting to pull money out of your investment accounts as you watch the numbers plummet, Lyons advises against doing so.

“During periods where you have decreased valuations in the stock markets, nobody likes to see their valuations in their accounts go down, especially retirement plan accounts that they have become accustomed to seeing going up and up and up year after year after year,” Lyons says. And now they’re witnessing a decline — though it will eventually recover.

He thinks that younger generations, if they can afford it, should take advantage of this opportunity to invest at a lower price.

To achieve their goals and objectives within the timeframes they have set for themselves, “we are suggesting that people remain invested, maintain their asset allocation that was designed to do so, and continue to add to their investment portfolio through their retirement account savings.”

One of the most reliable tactics is dollar-cost averaging. It entails putting away a fixed sum of money at predetermined intervals, regardless of the fluctuations in the market.

Lyons argues that investors should take advantage of current market conditions by “buying more shares at a lower price.”

Do not spend more than you have to

Drak and Lyons agree that saving money is crucial, and they point out that it can even be beneficial, despite the fact that it can be difficult to do so when the cost of groceries keeps rising and the cost of everything else does as well.

Interest rates on savings accounts and newly issued fixed income securities will increase as the economy recovers, according to Lyons.

Place your savings in a high yield savings account and watch it grow at a faster rate than it would have in the past few months. And even though that won’t keep up with inflation, it’s a start toward financial security.

Relax, it’s going to be a while

We spent a lot of time in the 1980s. Two recessions occurred, and years passed before inflation and interest rates decreased. Even though our current situation is unique, history teaches us that higher interest rates and inflation are likely to stick around for some time.

When addressing the younger generation, Drak tells them to “bear down” and accept their financial circumstances. Work as hard as you can, earn as much money as you can, and save as much as you can. That’s the secret. There is also no escaping it. It’s important to exercise caution. You need to scale back, and you need to be frugal.

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This article is for educational purposes only and should not be taken as professional advice. There is no guarantee that it will work.