How Well Did We Predict 2010? What do You Think About 2011?

All this week, I’m running new year-themed posts to ring in 2011. Don’t miss them!

Late last December, I asked a number of fellow bloggers to share their thoughts on what 2010 would bring in terms of money. It was a challenging time after a tough 2009 that brought more foreclosures, more job losses, and other financial pressures. Most people were ready for it to be over and were cautiously optimistic about the new year.

Forecasting 2010: A Review

Let’s take a look at a few of those 2010 predictions and see how well we did. These are a few of the favorites I solicited from other bloggers and those you shared in the comments last January:

Jim predicted low interest rates for most of 2010:

Savers will continue to be punished for not spending more of their money and putting it back into the economy. The one or two percent that we get today on our savings accounts will be the norm for probably the next year or so.

That’s certainly been the case all this year. Rates at Ally, my savings bank of choice, continue to hover in the low 1’s. Those who are diligently putting part of their money away are far from being rewarded. Thankfully, the market posted decent gains this year, offsetting some of those lower rates.

Patrick had the following to say:

I don’t have a crystal ball, but I imagine 2010 will bring with it some of the same struggles we saw in 2009 – including volatile markets, unemployment and tight credit. But I don’t think it will be all doom and gloom. I also think there will be a lot of opportunity in 2010, and having healthy finances will help put you in a better position to prosper.

Unemployment continued to be a hot topic in 2010, refusing to retreat to any reasonable levels in what’s being touted at the “jobless recovery.” Employers will need to feel confident about their sales and the economic climate before they start re-hiring again.

On the opportunity side, I think Patrick nailed it. 2010 saw a lot of people who had money on the sidelines begin to take serious advantage of the depressed markets (stocks, real estate, businesses, etc.).

Sam had this to say about what the job market would bring this year:

2010 is going to be a great year for the job seeker. Companies always over-fire during the downturn, and now have to over-hire in the upturn given the rebound in corporate revenue. There’s been two years of pent up demand to change jobs since nobody could go anywhere last year. A job market frenzy is on the horizon and those who are unemployed will find new opportunities that were once closed!

We haven’t experienced Sam’s optimism in our industry yet, but design & construction will be a special case for years to come. I haven’t seen nation-wide numbers, but I would venture a guess that at least 50% of architects lost their job in this recession. Locally, the number’s closer to 80-90%.

Having said that, 2010 wasn’t bad in terms of revenue, and we expect 2011 to bring even more growth. Sam might be a little late, but I hope his predictions are coming true very soon.

Len Penzo warned us about possible inflation:

Do I think inflation will raise its ugly head in 2010? I don’t know, but when it does come, we’re going to pay dearly for it. The sad irony of all this is that those of us who have spent the last decade or two being fiscally responsible, living within our means and saving diligent for our retirements will be penalized the most as inflation erodes the purchasing power of our soon-to-be worthless dollars tucked away in our retirement and other savings accounts.

High inflation hasn’t hit us yet, but Len’s observations are scary because we’re still waiting for them. The paradox he points out kind of makes me mad–nevertheless, I’d still rather be the guy with $20K in the bank rather than the guy with $20K in debt–don’t you think?

Aldra suggested that we’re focusing on the wrong things:

I hope that in 2010, folks pay less attention to the fear mongering and more attention to the reality of their financial situations and the fact that we can each do more, regardless of the greater economic climate, to ensure our financial security.

There was definitely a lot of bad news for those who were willing to pay attention. There were fears that what the Obama administration was doing would create an insurmountable financial burden on our country. There were economies failing across the globe. But I think a lot of people also took Aldra’s advice and focused inward, getting what they could done on the home front and forgetting about the rest.

Mrs. Money had this take on what we could expect:

There are many people out there that think the economy will turn around in 2010. I think that we will see a new wave of foreclosures but that’s the pessimist side of me. Personally I’m going with the notion that our finances will make great advances in the new year!

I think having finished the year, many of us would agree that the economy is turning around, though it’s definitely a slow U-turn. Foreclosures have not been in the news recently, either because we’ve become immune to their drama or because they have decreased since last year. Locally, short sales have definitely been a hot button issue, with many banks becoming much more efficient, but others still taking 12 months or more to make a decision.

Finally, here were a few of my own predictions for 2010:

The average person will be very focused on their money in 2010. Whether we don’t have enough of it, or have plenty, money has taken center stage in social circles and the media.

Overall, I think those invested in the stock market can expect modest returns, and the job market will strengthen in the coming year with some re-hiring to be expected. A big unknown that remains to be seen is the current administration’s policy-setting and how that will affect us (through taxes, impact on health insurance, etc.).

I think the first observation was definitely spot-on. I’ve had more conversations about  money this year than in all the previous years of my life, combined. It’s become much less taboo to discuss money issues because many of us are now in the same boat—there are no longer the doing-wells and the not-so-wells. We’re all struggling to keep as much as possible from our paychecks and get ahead.

The stock market did indeed post modest gains (the S&P was up about 15% this year), but the job market didn’t do as well as I thought. Companies, mine included, continue to be scared about hiring because of the time and cost investment required. Policy setting by the President and Congress continues to be an unknown and I think it will continue to be so for at least the next two years.

What About 2011?

Here’s my completely gut-feeling, utterly unsubstantiated prediction for how things will shake out in 2011:

• Housing sales will remain very strong at the lower price levels, with home prices remaining mostly level on average country-wide, with continued pressure and strength in specific markets.
• Interest rates will start to rise in the second half of the year, making borrowing more expensive, but rewarding those with savings in the bank. This will also help to keep housing sales in check.
• Unemployment will fall to 7% as companies start to re-hire out of the recession and people expire out of the unemployment system.
• If 2010 was truly the “Year of the Saver,” I think 2010 will be the “Year of the Entrepreneur.” So many of our colleagues and friends have gone out on their own and started awesome businesses doing what they love or know best. I think 2010 will see many of those business ideas come to fruition as sales start to pour in!

Weigh In—What Do You Think?

I’m putting the question out to our community for the second year in a row. Here are the questions I asked last year and what I want to know again:

• What can the average person expect from their money in 2011?
• How will the economy change/affect individuals in 2011?
• What are the best actions for people to take in 2011 to further their financial security?

I look forward to what you have to say!

Photo by C.P. Storm