Those who don’t pay much attention to the past are doomed to repeat it. There are so many sayings in this vein, but they all revolve around the fact that you must learn from your past errors. So let’s look at some key financial lessons we should all bear in mind:
Be Prepared for the Worst
Before the financial crash of 2008, we always heard the so-called experts talking about how some organizations were too big to fail. Then the crash happened and we lost Lehman Brothers, along with a number of other companies, including some that had been in business for over a century. This doesn’t mean you should be paranoid or overly cautious, but never rule out the bad things that can happen.
Avoid “Get Rich Quick” Schemes
If it looks too good to be true, it probably is. We can say this until we are blue in the face, yet it frequently pops up repeatedly.
The Great Depression of the 1930s is the best example of this. Stocks were seen as the rocket to the moon. Everyone climbed aboard with desires to get rich quick. Naturally, when the whole thing came tumbling down, the “fast money” people did too. What this should teach us is to not get swept up in the latest trends and avoid falling for get rich quick schemes.
Don’t Rely on the Government for Protection
The oil spill in the Gulf of Mexico taught us that regulation does not always provide adequate protection. If you believe that the government will provide a safety net should your business make a bad decision or that risky venture fails, then you are dead wrong. Recent events should teach you that you as a business leader should always take responsibility for your actions. Likewise, you as a homeowner must accept accountability for everything you do also.
Stay True to Your Values
If we look at the history of capitalism, we can see that it’s an endless cycle of booms and busts. The cycle is still with us today and it tends to run between 10 and 20 years. Some people get rich and then lose it all in record time because they are simply prostituting themselves to the next big thing.
Don’t abandon your values because you want to join in on the next big gold rush. Stick to the solid tried and tested business values and philosophies that have served you well thus far. And if you’re running a business, make sure everyone working under you is aware of this too.
Focus on Financial Conservatism
It’s fun to see poker players risk everything for one chance of success. However, in the real world this is a bad way of dealing with your finances. You should never be living hand to mouth, and you should certainly never risk what little spare money you do have on a one-off chance of becoming rich as a king. It’s easy to do this when the market is booming, but if the housing bubble of the late 2000s taught us anything, it’s that speculating is a huge risk — and very few people who did so got out alive.
The Bottom Line
What this guide should teach you is that the traditional financial principles of thrift, careful research, and conservatism remain the best ways of protecting your personal and business finances. Yes, you may hit it big by not following them, but taking big risks usually end badly.
Author Bio: Nancy Trad is one of the financial members who run www.WaysToMake.org. As a single mother in the 21st century, it is key to have a grip over your finances. Our path to financial stability can be easily maintained by taking lessons from the worlds past that others had to learn the hard way.
Photo Credit: ToGa Wanderings