Saudi Arabia’s new prince vowed to diversify their economy and triple non-oil revenue by 2020. This is a telltale sign that oil’s glory may not resurface to as an extent compared to the past. I too suspected overtime that counting on employment to fund my future dreams was only futile. And because my employment is heavily too dependent on oil, overtime my plan has been to gradually diversify away from it with investment income.
However, it is getting the starting funds to invest that is the killer for most people. My oil-dependent net income sits at $5,028/month; reminder $1,209+. At my current saving rate of $1,200+/month, progress will be very slow. To achieve a 50/50 oil and non-oil income split, I would need to generate $3,819 in additional net income. Even this may be inadequate, as in the event of job loss, my income would revert to the EI one- $1,836 net- a $3,192 (63.5%) reduction. It would take a very sharp decline in other investments to have this much of a loss, and the probability of the job loss would be much higher.
Wth a 25% gain like that found in leveraged real estate or more rapidly growing company shares, only $183,312 is required. 6 years of saving and compounding $1200/month at this rate of growth, which is still a long time. Hence, I must aim for even higher growth rates and higher saving rate.
I have been thinking about the Porsche or new BMW Convertible more than usual lately, but buying one tomorrow would stunt my growth as my savings rate would drop significantly- to only $400/month for a Porsche 911, $600s for the BMW. Unless I found $15,000 cash to put down for the BMW, $38,000 for the Porsche.
But the problem is, now I lower my reserve ratio for the budget. I save less per month, putting myself at greater risk of financial turmoil in the event of job/income loss. Everyday I’ve been trying to think of a way to hedge this risk- provide $xxx/month of extra oil-unrelated money to cushion the additional running cost. Returning to the original topic of income diversification, in the event a job loss, with only 50% of income being from oilfield employment, I would still have the other 50%. Better than EI cheques, so then I would not have to lose the Porsche/BMW/lifestyle.
So far haven’t figured anything out, but everyday I will keep brainstorming.
Let’s wait for Q2 reports to come and see how I do.