Ah, a booming economy. We all pray for it and don’t want it to ever end. Don’t like your job? Just head to Indeed and find a new one within a week! This is especially the case during booms here in Alberta because there simply isn’t enough manpower to supply the energy sector during the good times. The stock market is booming, more and more investors are entering the market and everything is good!
However, they all end. And most of the time, they end in a horrific, slap in the face kind of way. Soon you’re taking whatever job you can because the job listings online have gone from 35 pages to 3.
One benefit to a recession however, is that it can teach a person a lot in terms of frugality and disciplined spending habits. During a boom, we simply think the money is never going to end. Humans are internally wired to not think about the future. Only the ones who make an honest effort to do so succeed in it. The farther away a consequence is, the less likely we are to do anything about it.
A new boat? Heck yeah! Air conditioned and heated seats? Bring it on! I’ll have this paid off in no time anyways.
Not exactly words to live by, but people are going to do it anyways.
The 2008 recession taught me a lot
I was involved in the Oil and gas sector back in 2008. Pretty much fresh out of high school, I picked up a job with an oil company and was instantly rewarded with a pretty decent sized pay check for having no education and no experience. It didn’t last very long however, and by the middle stages of 2009 I was unemployed.
I made the mistake most people do. I spent like it was going out of style. Financed a new car, rented a really nice place. Did all the things most every 20 year old would do making a decent size salary.
I was in no way rich. But the thing about it is, spending is all relative. A person making $1 million dollars a year wasting $500 000 is much the same as a 20 year old making $50 000 wasting $25 000.
There is no better kick in the rear than when money is getting tight and you’ve committed to a ton of things you simply don’t need. It never occurred to me when I was working, but once I was jobless I really sat down and thought to myself, do I need this SUV? I’m living on my own, do I really need a 3 bedroom apartment downtown?
My situation allowed me to learn a very important lesson
As it always does, the economy recovered and by 2012 and I took a position in the oil and gas industry again. This time however, I came prepared.
As I watched the endless amounts of tradesmen and office workers spend spend spend in the same cycle that seems to repeat itself in the oil and gas industry, I quietly tucked away every single dollar I could, preparing for the next downfall.
It didn’t take long, as oil prices collapsed in late 2014 and layoffs were abundant. I fortunately was one of the few to survive, more so because my position in HR rendered me still somewhat useful.
However, most didn’t. And as they head home desperately looking for other work, the bills don’t stop coming. Your bank doesn’t care that you’ve lost your job. They want your payments, and they want them on time. That boat or new car that was once an enjoyment now becomes a heavy burden.
Think about the next 10 years, not the next 10 weeks
My ability to cut back spending to the absolute necessities and save as much as I can allowed me to turn those savings into a down payment for a home in 2014.
Most will argue that frugality is a burden. We only live once, so we should be able to do what makes us happy. Which I completely believe in. But it has to be scaled to a certain level, to the point where if life gets rough, and it inevitably will, you can survive.
Watching someone struggle with money, especially when it is wasted on consumer goods is one of the rougher things you can witness. I’ve watched it destroy families, lead to depression and ultimately ruin lives. It’s not easy to get out of debt, especially credit card debt.
And when the economy crashes, nobody is lining up to buy your boat, your hot tub, your brand new car. If anything, they are lining up to sell there own. More than likely what you’ll end up doing is refinancing things to reduce your payments when you don’t have the cash, which will put you in a much worse position than you started with.
This article isn’t meant to be a one stop shop for learning how to save your money. It’s simply meant to plant the idea in your head that the good times will not always be good. And although the good times will eventually come back, you’ve got to be able to withstand the rough times and come out relatively unscathed.
Be wise with your money, and you’ll be happier than you’d ever have been spending it all.