How to Predict the Financial Future and Never Be Wrong: Top Ten Personal Finance Blog Posts #5

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I’m feeling proud of myself today. Last month I went out on a limb, made a prediction about Valentine’s Day spending and a few days ago, I was proven right. As a magician of financial forecasting, I rarely let the audience read as I dissect the secrets of my prognostication sleight-of-hand. Today, I’m going to make an exception, but first you need to make a promise…

..While reading my secrets below, keep in mind that my methodology is not all that different than what the guys running the government or Fed are doing.

Now that you are feeling warm and cozy; confident that decisions about our economy are being planned using the very same prediction methods, here are my tricks.

Trick #1: Don’t Predict Too Far into the Future

I made my prediction about Valentine’s Day spending at the end of December for a number of reasons:

  1. I wanted to own a top spot for “spending on Valentine’s Day” on google and in SEO, the early bird gets the hits. Plus, I was depressed that Christmas was over and my “spending on Christmas” post would not be getting the traffic it once commanded.
  2. No information from consumer research had yet been released for 2012, so I had to “make-up” my own numbers.
  3. I figured one month was too short of a timeframe for consumer sentiment to dramatically shift away from upbeat consumer sentiment that was building after Christmas.

In other words, the smaller the time frame, the easier it is to be right about a prediction. Your chances of guessing who will win the 2012 Super Bowl was one out of two if you were picking the potential winner on February 4th, 2012. Picking the winner of the 2013 Super Bowl today, is about one out of thirty-two. If you want to be right, what odds would you prefer when making a prediction?

If you want to increase the accuracy of your predictions, you have to wait until the last moment. Don’t do things like Don’t Quit Your Day Job and try and predict the stock market over the next 10 months. Unless, you are smart enough to follow trick #2.

Trick #2: Make Wide Predictions That Would Require Acts of God to Be Wrong

What do you think would be a dramatic change in consumer spending? Oh. You don’t think about changes in consumer spending? Good. Then you won’t have any clue as to whether or not I’m making a very broad prediction.

A dramatic change for consumer spending from year-to-year would be something like plus or minus 15%. That’s a window of 30 percentage points. So, when I predicted the change in consumer spending for Valentine’s Day, I used a tiny window of 5-10% or 10 percentage points.

In other words, I cracked the window about one-third of the way to get my prediction through. It’s even wider when you consider the fact that I was pretty certain spending would increase. In that case, the window is two-thirds of the way open.

Trick #3: Use the Edit Post Button

If you are good at tricks #1 and #2, you won’t ever need trick #3. However, acts of God do occur and in those cases, I use the edit post button. It’s a nifty little option blog platforms have that let you go into your posts and change the words you wrote.

I must stress, that I am good with tricks #1 and #2, so I’ve never needed to use this trick.

The trick does have a downside. The internet has a habit of “caching” every, single iteration of your webpage. So, there is a record of your uncreative editing somewhere out there.

Tricks I Learned from Don’t Quit Your Day Job

I thought I knew everything about pretending to predict the future. The boys at Don’t Quit Your Day Job taught me a few I’d never used before.

You can make multiple predictions. Just assign the guesses official sounding terms like conservative, moderate and aggressive. This trick gives you multiple chances of being right. Who cares if all but one of your predictions is wrong, the one that’s right is all anyone will care about.

Another trick would be to base predictions on someone else’s guesses. That way if you are wrong, you can blame those other gamblers for giving you bad information. “

Just say something like, “there was a lot of irrational exuberance out there, but my math was solid.”

Top Ten Family Finance Blog Posts of the Week:

Now that I’ve totally lost all credibility in my finance predictions, I think it’s best to move onto those whose credibility still holds weight.

  1. Are you a McGyver Mom? No Telly, No Trouble knows that socks for mittens are just as fun.
  2. If you are wondering where the US entitlement programs are headed, look no further north than our neighbors in Cananda. Financial God has the details on proposals to cut entitlement costs.
  3. Married with Debt is exploring the world of combining finances after marriage and the possibility that your new spouse might have to foot the bill for those shoes/golf clubs you bought five years ago.
  4. The Simple Finance Blog earned over $1.9 million on their 1099 last year (if you moved the decimal point two places to the right)! What looks good on paper is a potential IRS nightmare. Learn how to resolve the tax problem of “my employer says I made 100 times more than I actually did.”
  5. Familyancial Wealth discusses ways in which he lovingly nudges his spouse down the financial straight and narrow. Take notice of how he cleverly leaves out the part about what to say when your spouse learns how much money you’ve been spending on golf and hot dogs.
  6. Extreme couponing demystified and explained for the average Joe. Now that I know what it is, I’d like to replace the word “couponing” in the phrase “extreme couponing” with the word “working.”
  7. You can deduct the amounts you pay in sales tax on your income taxes, but you have to keep receipts in a plastic bag. The Dog Ate My Wallet explores the record keeping needed to take the deduction; something I’ve always wanted to try avoid.
  8. The Personal Finance Whiz makes the pitch for high deductible health plans and how his family saved thousands from having one.
  9. The Money Principle submits her investment mistakes as a potential candidate for the Financial Darwin Awards. Let’s just say stock picks and roulette was involved in the making of this mistake.
  10. Why must PF bloggers write about food budgets whilst posting delectable photos of foods I’d like to be eating? Couple Money is sharing her secrets to taming the grocery bill, while tempting me and mine.

Carnivals that Featured Smart Family Finance

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