The biggest money stories of 2011

From gyrating markets to anemic interest rates, it's been a financially stressful year. Here are 8 stories that had a lasting financial impact -- and what to do now.

 

From Occupy Wall Street to market madness to insanely low mortgage rates, 2011 has been eventful for personal finances. Here's a look back at the eight biggest stories that affected your pocketbook this year, along with practical advice for protecting your assets going forward. After all, while past performance is no guarantee of future results, you can always learn valuable lessons from the news.

Stock market volatility

The story: A roller-coaster ride doesn't even begin to describe the gyrating stock market in 2011. A major culprit was concern over the debt crisis in Europe, which led to a lot of volatility and some big trading days. One of those days was Nov. 30, when the Standard & Poor's 500 Index ($INX -0.43%)gained 4.3% in a single trading session. The VIX, an indicator of stock market volatility, registered as high as 48, a level unseen since the depths of the U.S. financial crisis in late 2008 and early 2009.
Our advice: Stick with stocks. As Knight Kiplinger recently pointed out, despite the ups and downs of equities, they remain the single best investment over long periods of time. Use dollar-cost averaging to smooth price swings, resist panic selling and attempts at market timing, and lean on dividend-paying stocks during difficult stretches. Kiplinger forecasts a return of 8% to 9% for the S&P 500 in 2012.

Big-bank backlash

The story: The ultimate goal of the Occupy movement might be ill-defined, but one of the most prominent targets of its ire is the financial-services industry. Many consumers agree, dealing a blow to big banks in 2011 with the wholesale rejection of a $5 monthly fee on debit cards. Beleaguered bankers quickly backpedaled for fear that outraged customers would take their business elsewhere.
Our advice: Tired of being nickeled-and-dimed by your big bank? Check out a credit union instead, as big-bank customers were urged to do in October on International Credit Union Day. These nonprofit financial institutions often offer lower fees and better interest on accounts than big banks do.

Will the economy improve in 2012?

Dawn of the tablet wars

The story: The year that saw the death of Steve Jobs also saw the birth of competition among tablet makers. Jobs fired the opening salvo in 2010 with the debut of the iPad from Apple (AAPL -0.03%, news), but the war for tablet supremacy began in earnest as everyone from Samsung and Sony (SNE +2.04%, news)to Research In Motion (RIMM +1.12%, news)and HTC entered the fray in 2011. Apple, which rolled out its upgraded iPad 2 to defend its position as tablet leader, faces perhaps its biggest threat yet in the Kindle Fire from Amazon.com (AMZN -0.44%, news), released just ahead of the holiday shopping season.
Our advice: The clear victor in this scuffle won't be either Apple or Amazon; it will be the consumer. If you have a spare $499, by all means buy an iPad 2. Apple's tablet is best in class. But if you can get by with fewer bells and whistles, the Kindle Fire at $199 is an economical alternative. More tempting for late adopters might be to put off a tablet purchase until 2012, when prices will almost certainly drop. Meantime, make do with your smartphone and a Kindle Touch e-reader (starting at $99).

Payroll tax holiday

The story: Overshadowed but significant in 2011 was the payroll tax holiday that allowed most workers to keep an extra 2% of their paychecks. That translated into real money that made real purchases, paid real bills and funded real retirement accounts. Someone earning $50,000 a year, for example, reaped an extra $1,000 in 2011 thanks to the payroll tax holiday.
Our advice: Keep your fingers crossed that the payroll tax holiday gets renewed for all of 2012. (Congress has passed only a two-month extension so far.) Absent an extension, the U.S. economy could see a 0.5% reduction in gross domestic product next year, estimates JPMorgan Chase. If iyou need help replacing that lost take-home pay, try one (or more) of our "11 ways to get extra cash fast," from selling your stuff on consignment to participating in clinical trials.