Things are bad here.
Like, really bad.
I feel like the Canadian media is grossly under-reporting the real state of the economic downturn in Alberta because, peeps, it is BLEAK. My city whose streets were once paved in gold is quietly becoming a wasteland.
No jobs, no money, tons of debt
From the outside looking in, the numbers only tell half the story: over 11,000 group layoffs in the province so far, applications for Employment Insurance up over 30%, etc. These numbers don’t reflect the thousands and thousands of contractors that work in the province who have simply seen their contracts “not renewed” or canceled, or those that don’t qualify for EI for one reason or another.
But a few months or a year of joblessness wouldn’t hurt someone that has prepared for it. Too bad Albertans, particularly Calgarians, lead Canada when it comes to debt. The average Calgarian owes $27,712 in consumer debt — 33% more than the national average — and while they seem to be in a hurry to reduce it, it will be a challenge on no income. In my opinion, most Albertans on the verge of, or already in, financial distress.
Many of my MBA classmates still have yet to find jobs, even though we graduated more than three months ago. Many of those close to me have been laid off from the jobs they did have. These are not small losses.
Even just 3 months of unemployment represents a loss of $10,000 to $15,000 (or more) in net income for one person.
That is a lot of cash to miss from your bottom line. It’s a lot of rent, a lot of groceries, a lot of bills to be paid out of your savings.
The Canadian stocks and ETFs in our investment portfolios have been hammered over the past ten months, eroding months or years of saving week after week. My fiancé, who works in oil & gas, has watched no less than 1/4 of his salary evaporate as the value of his company stocks plunged over the past year. Since most of our US holdings are in our RRSPs, our retirement accounts remain unscathed, but our TFSAs with Canadian holdings have delivered returns that are mediocre at best, sustained primarily by dividends and few one-off winners. Overall, our household income is less than it was last year, and our net worth isn’t increasing at the pace we expected or wanted.
Market cycles are normal and to be expected, but it’s frustrating to face job insecurity and wealth depletion simultaneously.
Because I don’t work directly in the industry, my job is fairly secure. This is coupled with my already established investment portfolio (energy stocks be damned!) and the bustling side hustle Money After Graduation is becoming, I recognize that I’m in a position of privilege. But that doesn’t mean I’m not nervous, or upset.
Compared to my friends, my frustrations are minor. For now, all I really feel is guilt for my steady paycheque and side business. At the same time, the threat of further layoffs hangs over my head too, and I’m running myself ragged to build this website into something that can protect me from a pink slip, should that day arrive. Having dumped virtually all of my savings into my MBA, I feel excruciatingly vulnerable to any dramatic change to my income or employment, and more frustrated than ever that I’m still years away from safety. My previous job was an iron-clad union position, and my prior bank balance was one that could sustain me for at least 2 years. That is no longer the case. This is coupled with the stress of planning and paying for a wedding, which seems more frivolous than ever in light of the economic climate.
Of course, I am not in the worst position. I am merely worried. But there is an upside:
People without jobs don’t buy houses.
Calgary’s housing market, which has placed third right behind Toronto and Vancouver when it comes to rapid growth and outrageous prices has slowed considerably.
House prices are in decline, for the first time since the Financial Crisis of 2008, and new listings are spending more time on the market, unsold, than ever before. While a few are cheering on these minor changes, my fiancé and I are still taking a “wait and see” approach. We expect it to get worse (which is better for us).
We’ve talked at length about whether or not home ownership is right for us, and what kind of home we want, as well as when and where we want to buy. The problem we face is simply that whenever we do the math, renting always comes out ahead. Until that equation changes, I doubt we’ll be in any hurry to own. Most people don’t understand or support our position, but most people don’t know how to invest in the stock market either so I can’t explain it. No matter how you cut it, investing consistently in income-generating assets like dividend stocks and ETFs provides infinitely more financial security (and precious liquidity) than owning a home. The last thing we want to do is take out a 25-year mortgage for a house, only to watch prices fall and/or face job loss.
It seems the best course of action in a market downturn is inaction.
And stock-piling cash like a mad person. While the pull-back in the stock market hurt our portfolios initially, it also represents a positive opportunity to continue to invest at a lower price. When economic recovery arrives (as it inevitably does, no matter how impossible it may seem), the investments we’re making now will return handsomely. For the time being we are merely continuing to do what we have been doing for the past 10 months: waiting it out and hoping for the best.
Apologies for the doom & gloom post today, I just wanted to get my thoughts out of my head so I can concentrate on other things!