Consumer Debt during the Great Depression

Not long ago I was reading "The Automatic Millionaire" by David Bach. In the chapter on paying off debt, he mentions that those who lived through the Great Depression hated debt. I've read the same thing in other books, but without an explanation as to why those people avoided debt after the Great Depression ended.

Did they avoid debt because so many people were without jobs? Was it because they lost their savings in the stock market crash? Was it because of inflation where everyday items became expensive?

I decided I needed to dig in and find out why those who lived through the depression avoid borrowing money. What can we learn from them?

A couple of online searches revealed that the economy grew rapidly before the Depression occurred. Many banks and finance companies came up with creative ways to lend money. A couple of methods available to consumers included credit and installment loans.

It appears that a large percentage of the middle and lower class borrowed money for consumer goods during the economic boom. When the Depression hit, many people were left without jobs or smaller incomes and may not have been able to pay back their debts. If the consumer goods had value, they were reposessed by the bank.

When most people who had borrowed money were unable to make monthly payments because of a lost or reduced income, or knew someone who was in this situation, they most likely resolved right then and there not to borrow money, because they could see the stress it caused.

The reason that the old timers avoided debt wasn't simply because of the hardship they experienced during the Depression, but because they or someone they knew got burned because of excessive borrowing.

Today, as we move out of the Great Recession, let's remember their advice to live within your means, avoid borrowing money, and save for a rainy day.