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SOMETIMES WORLD events beyond your control create a hard reset point in your financial life. A before and after. For me, that point was the 2007 Great Financial Crisis (GFC). The psychological scars still reverberate into my current life.
Looking back, I was aware of something rumbling about in the financial landscape but didn’t take much notice due to being deeply involved in running my business. Little did I realize the impact heading my way.
At that point, we had finally reached a good place in life. It was ten years since founding my company and the memory of the first five tough, lean years were a fading thought in my mind. Meaningful cash was flowing into our personal accounts, and business was very profitable with dreams of life-changing expansion on my mind. Nothing seemed impossible. We were young and proud of our achievements.
Mid-2008 saw banks in my country going under and the government stepping in to prop them up. My wife Suzie worked for a large UK-based international bank. I distinctly remember one Saturday morning chatting together about the crash in Suzie’s employer’s share price and whether we should take a big personal position. We both thought the company was fundamentally strong and a massive bargain.
Any thoughts about investing went out the window by that Monday afternoon. My bankers called me to an urgent afternoon meeting. With little in the way of diplomacy, immediate repayment of loans and overdrafts was demanded within seven days. The final insult was informing me that a small, unused $100 overdraft on my personal account was withdrawn with immediate effect.
Shell-shocked understates how I felt as I left the meeting. It’s a bit of a blur, and so were the next 18 months of fighting for survival. All of mine and Suzie’s personal capital was poured into the business, and inventory was run down to the lowest possible level to generate cash flow. My suppliers had to wait for payment, and I purchased stock almost daily for over a year.
Beyond the financial strain and exhausting work schedule, there was another weight I carried—guilt. My suppliers had to wait for payment, and that violated something fundamental in me. It was a matter of my honour and honesty. My conscience gave me no choice about paying them back; it’s just what you have to do.
But the delay itself felt like a breach of my word, a compromise of values I’d never imagined I’d make. The bitter irony wasn’t lost on me: the banks who’d shown zero consideration in demanding immediate repayment had forced me into a position where I had to ask suppliers for the very grace my bankers refused to extend.
Personally, the main anxiety I felt during the first year of our struggle was the thought of approaching the tax authorities. I was terrified of telling them I couldn’t gather the capital to fully pay the corporation tax bill. Unbelievably they were the most understanding of all my creditors and accepted a three month delay without protest.
It’s hard to convey the unease and vulnerability we both felt. At least I had some agency trying to control our business. Suzie only saw our savings evaporate and me working 16 hour days seven days a week. We also had the worry that Suzie worked for one of the banks involved in the crisis. Our only dependable income could disappear with the snap of a corporate finger. We had no answers, but we had each other.
Slowly our heads peeked above the black clouds of despair. I went from juggling cash flow on a daily basis, banking every check within an hour of receipt and praying it didn’t bounce, because I wasn’t sailing these stormy waters alone—my customers had issues also and they were stretching my credit terms to breaking point. One day, more than a year into the crisis, I realised there was enough in our business account. I didn’t need to rush to lodge the check in my hand; one more day could pass…the beginning of a turnaround.
By the middle of the third year, we had turned things around and managed to get a firm financial footing, with the business now operating on a cash-positive model. This enabled Suzie and me to start refilling our personal finances. Never again would I be dependent on credit in any manner. This reset point lasted until I sold my business earlier this year and still holds sway in my personal financial life.
Undoubtedly, there was an opportunity cost to my fundamental and permanent management shift. Growth had to be slow and organic, not explosive and fueled by lending. My personal wealth would possibly be much larger if I had gone cap in hand to the banks. For me, it wasn’t a hurdle I wanted to cross. A comfortable life was enough. I didn’t need riches.
While it was a traumatic experience, I feel it was an overall positive result. Debt changed from a way of business life to an unnecessary instrument that was also banished from our personal lives. Not much good came out of the GFC, but a dislike and avoidance of debt was the best result for our long-term peace of mind and future retirement. It wasn’t a lesson I wanted or expected but it was one I certainly learned and took to heart.
Have you ever reached a financial reset point in your life? Was it, like for Suzie and me, a nearly unbearable burden at the time? In hindsight, does it now seem like a worthwhile experience to overcome? Or was it too large to overcome and still negatively affecting your financial well-being?
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Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
Mark Twain reportedly said:
“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain”.
Your article brought back memories. In 2008 I worked for a 30 year old family owned industrial distributor. They ran a lean operation, had consistent profit levels, and didn’t believe in debt.
When things went south, the owner held a meeting and stated that no one would be let go or see a cut in base pay. His order was to get out in the field and sell like crazy since all our competitors were laying off sales reps and support staff.
It wasn’t pretty at first; 2009 sales dropped 50%, then increased 30+% in 2010, and roared back in 2011. The company came through stronger than ever.
I was lucky to be in the right place when all this happened. Every situation is different but it illustrated to me the advantage of low debt in business and personal life.
Being debt-free for the rest of my time in business was the best thing that ever happened to me. No more giving the bank access to my accounts, no more sitting through their twice-yearly interrogations and their frankly dim-witted questions. An absolute godsend. When the sector eventually steadied itself and they came back around with their finance offers, I took real satisfaction in turning them down flat — and reminding them exactly how they’d treated my company during the GFC.
Thanks Mark for a moving reminder of how debt can you leave you “hung out to dry” when things go bad. When times are good, it certainly can be easy to dine out on cheap finance.
Kudos to you for making it through.
Oh my God, talk about getting hit in the mouth. I can only imagine the knot in your stomach when the lenders demanded their money back.
Your experience ties in with Grossman’s thoughts about unexpected surprises. The few people that recognized the dangers of the mortgage derivatives that caused the ‘great recession’ were rebuffed in their efforts to avert the disaster; greed ruled the day.
It took a great deal of tenacity and gray matter for you to survive such a shock. I suspect that some young business owners would have turned in the keys and sought the comforts of being someone’s employee.
Dan, there’s another possibility too: I was too pigheaded and stupid to even consider giving up.
Mark – thanks for sharing such a personal story, but also a success story. Congrats on navigating those times.
My memory of that time is also gloomy. My employer was living hand-to-mouth, I was divorced and struggling with some of the issues related to suddenly finding myself single, with less family income, and maintaining connection with my 21 and 19 year old sons. My employer was acquired, which was a relief, but then there was concern about employee cutbacks. In the midst of the GFC, my (new) employer publicized that there would be no employee cutbacks beyond attrition, but they implemented a financial austerity program that meant no raises, severe travel limitations, multiple authorizations required for expenses, and so on. It was hard, but it was doable. During this time, my manager informed me I’d been promoted but would not receive a raise in salary until the financial fog had lifted. Gradually life relaxed a bit. The following year I met the woman I would eventually marry. Luckily, since then, it has been relatively smooth sailing. My wife retired in late 2019 and I retired in mid-2020, just as COVID hit … but that’s a different story.
payroll was my largest expense, and I was running out of runway. I gave my employees a stark choice: everyone takes a temporary 20% pay cut, or we lay off 20% of the team. I left the decision with them. To a person, they chose the pay cut. They were smart—they understood how serious the situation was and how hard it would be to find another job during the GFC.
Thank you for this wonderful article.
I think a theme of Humbledollar readers is our feelings of responsibility regarding our financial wellbeing. We recognize that there are forces beyond our control, but we are also devoted to a sense of honor or responsibility where we do have control.
Excellent Article. You worked hard, found a way to survive a very difficult time. Congratulations and thanks for sharing. Enjoy retirement.
It was one of those situations. Keep your head down and keep on going. Have faith in your choices and hope for the best… a lot of good businesses went to the wall for no reason other than a lack of support from the financial system. I was just extremely lucky. Retirement decummulation is a breeze by comparison.
Mark:
Thank you for sharing your harrowing story, and I’m so glad you and your wife were able to navigate through it. It just reminds us of the truth stated in Proverbs 22:7, where it says…”And the borrower becomes the lender’s slave.”
A lender certainly has real control over your financial future if they decide to exercise their power—whether that’s calling in a loan, changing terms, or accelerating payments.
We learned this the hard way. That experience fundamentally changed how we approached debt of any kind.
It was a horrible time and experience, in 2008 I was 2 years from retirement and my 65/35 stock/bond retirement savings dropped by 40%.
I committed the investment sin by selling my investments when they had re-risen by 2/3. My overall net loss by mid-2009 was about 13%.
But the most damage it did was turn me into a skeptical investor who was afraid to invest in equities that could drop by 50% at any time due to another unforeseen financial crisis or world event (like nuclear war). Consequently I have largely missed out on the huge equity market gains of the past 15 years.
My wife had stock options with the bank she worked for. When the share price crashed during the GFC, the options went underwater and stayed that way for years.
Most of her colleagues lost faith and sold at a loss. But she held on. Eventually, the share price recovered enough that she could exercise the options at a decent profit.
I think this illustrates something fundamental: long-term faith in humanity’s ability to innovate, overcome challenges, and create value is a cornerstone of investing.
IMO, what happened in 2007/08 was not a normal stock market downturn or business cycle thing. What happened after the dot.com boom in 2001 was one of those. I’ll use Mark’s abbreviation, the GFC, was the result of criminal activity. And none of those responsible went to prison for causing the GFC. And that is a shame.
If the banks weren’t bailed out, we would’ve had even bigger problems. It was necessary for the overall good.
Sime of it was criminal activity. Most of it was business as usual. For instance, in the late 1990s I moved my assets out of a brokerage firm which had derivatives and repurchase agreements in its interest bearing cash account. Their poor choice to do this was legal. They crashed in 2008.
Another example: in 2002 or 2003 we sought a $200k mortgage to put an addition on our house. 1.) The lenders kept pushing variable rate mortgages. 2.) They kept pushing us to borrow more. One said, “You qualify for $450k. Imagine what you could buy.”
Legally, we did qualify for $450k, and a lot of other people maxed out accordingly. We stuck to the $200k.
The moves were not illegal. The regulations were too lenient.
Great article Mark, thank you. I can’t imagine how hard the GFC must have been for business owners. When there are runs on the bank, as there was here in the U. S. in 2008, at Wachovia (now owned by Wells Fargo), and Washington Mutual (now owned by J.P. Morgan Chase), to name just a few, you know the system is in big trouble. In 2023, when the Fed and the Treasury stepped in and backstopped not just the FDIC insured deposits at Silicon Valley Bank, but all their deposits, I wonder if they headed off another massive banking crisis. The problem then was the rapid and massive increase in interest rates caused many banks across the country to become insolvent if their Treasury securities, which the Fed pretty much forced them to buy when rates were extremely low, were marked to market. It was quite something to behold as the Fed was required to solve a problem of their own making, and is a reason I keep very little money in a bank. Inherently, fractional reserve banking is risky and the Fed will be the last one to tell you when that risk has become dangerous.
I can see why regulators keep their cards close to their chest—the whole system runs on trust and confidence.
That said, don’t you think the 2023 intervention, combined with the $250,000 FDIC protection per institution, actually strengthens the case for U.S. retail banking? The sector seems considerably more robust now than it was leading up to the GFC.