What Happened With Your Money in 2009

Our nation has seen some amazing ups and downs in 2009. From watching rises in unemployment to witnessing the unexpected increases in the stock market, it’s been more than difficult to figure out how to manage money responsibly this year.

As we stand on the doorstep of 2010, it’s time to think about the good and bad of this year to help us approach the new year. So let’s take some time to look at the ten of the most memorable economic/financial events of 2009.

1. Unemployment Skyrocketed

One of the most notable events of 2009 was the unemployment rate reaching 10.2 percent, its highest point in 26 years. As Americans spent weeks and even months searching for new employment, the government was responsible for providing federal assistance to those who had been laid off since the financial crisis.

In December, President Barack Obama held a job summit to help circulate ideas for ways to create jobs. But unfortunately, 2010 doesn’t look much better than 2009 in relation to job creation. In fact, some predict that the job outlook may not improve for several years.

2. The Stock Market Bounced Back

After the financial crisis in 2008 – and an unprecedented drop in the stock market – no one was sure if the market would ever bounce back. But it has. In fact, to date, the S&P increased 22 percent in 2009, which is a decent improvement considering that the market declined 38 percent in 2008.

Of course, having the economy bounce back didn’t mean that investors felt as comfortable with the market as once before. The good news is, however, that there is life after a market crash, as long as you know the where to invest after a recession.

3. The Stimulus Package Was a Semi-Success

Well, there has been a lot of criticism about Obama’s $787 billion stimulus plan – the main one being that it didn’t work. However, this point could be argued a couple of different ways.

On one hand, it was deemed successful in terms of helping people buy energy-efficient cars with the Cash for Clunkers program, as well as offering a tax credit to first-time home buyers. However, when it came to job creation, the stimulus fell a little – or maybe a lot – short.

In a recent report, the White House said it had so far created 640,000 jobs, but many experts disputed their existence – or whether less than a million jobs could truly compensate for the millions still out of work. There has been debate as to whether a new stimulus package is appropriate to continue similar initiatives; however, it seems Obama already has his plan underway.

4. Bank Closures Were Bad – But Not the Worst Ever

In 2009, we saw a higher number of bank failures than in many years as a result of the financial crisis. Our last report had a total count of 133; however it seems the number has since jumped to 140. However, what we discovered was that the bank failures, while high in count, were not as bad as they had been in the history of failures. In fact, the United States saw over 1,300 failures the year after the Crash of 1929.

Does this mean this year’s failures weren’t significant? Absolutely not. But as we see some of the bigger banks paying back their bailout (TARP) money, we realize that we may be on a better track than the failures seemed to once predict.

5. The Federal Reserve Dropped Interest Rates Dramatically: Good for Some, Bad for Others

In an effort to stabilize the economy and stimulate growth, the Federal Reserve decreased interest rates across the board. This was great news to those looking to purchase or refinance a home (mortgage rates stayed at or below 5 percent for quite some time), take out a bank loan, or sign for a credit card.

However, those looking for good returns on their savings, money market, CD and checking accounts saw their rates drop as well. Some accounts saw drops of several percentage points, meaning they couldn’t earn nearly as much as before. As for what will happen in the future, some say the Fed plans to keep rates as they are into 2010, while others think the rates may increase sooner than later. Your best bet is to get ready either way.

6. Foreclosures Got Out of Control

Every attempt by the government to help homeowners save their homes from foreclosure (including loan modifications), whether they were underwater or just seemed to go into default due to lost employment, apparently failed. While the foreclosures were helpful for those looking to buy because they resulted in a historic drop in home prices, for those losing their homes, it was tragic.

Unfortunately, even Obama’s new mortgage plan guide (the Making Home Affordable modification and refinance programs) was not able to slow foreclosures considerably. November 2009 showed that the number of U.S. homeowners in default had reached a record high. Even worse, experts predicted even more foreclosures in 2010.

7. Consumers Fought for Fair Credit Card Practices

Early in 2009, Obama came up with the Credit Card Bill of Rights that would require credit card issuers to put an end to unfair practices such as sudden interest rate hikes, unexpected lowering of balances and hidden fees. However, since the new guidelines were announced, credit card issuers found ways to buck the system before the effective date, forcing legislators to move the date up a bit.

But even after some consumers decided to dump their credit cards and studies revealed a three-year low in customers satisfaction, issuers not only found ways to add fees to debit cards, but add new fees for those who kept their credit cards.

8. Lending Tightened Up

After the financial crisis, many banks found it difficult to lend money – partially because their funds were eaten up after distributing subprime loans to people would couldn’t pay them back. Those banks that didn’t go bankrupt as a result made sure to protect their financial assets by only lending to those with supreme credit.

The only problem was that with millions losing their jobs, hardly anyone had that type of credit. As a result, some people decided to turn to peer-to-peer lending to get the money they needed. This didn’t stop Obama from pushing banks to loosen up their lending practices to help stimulate the economy after they received their government TARP funds.

9. Student Loans Dried Up, Repayment Was Made Easier

Another result of the financial crisis and bank closures was a lack of student loan availability. This was particularly tough for students heading to college since tuition costs increased again.

With private student loans drying up, the federal government had to step up and offer more loans than in years prior. Additionally, those who were in the repayment process were offered new guidelines to make federal student loan repayment easier.

10. Economy Recovered(?)

Economists have gone back and forth with whether they think the economy is recovering. However, Bernanke noted in Sept. 2009 that he thought the recession had come to an end – at least on paper. But with unemployment still on the rise and laid-off workers still needing government assistance to survive, the effects of the recession are sure to last for some time. At least consumers have managed to make wise decisions on their own, including decreasing their debt.

While 2009 was definitely an eventful year, there’s no doubt that 2010 has even more interesting events to come. Let’s just hope that many of the mistakes of 2009 can help us learn to manage our debt, make better savings choices and live financially happy lives.

What do you think were the major events of 2009?