When you live in a boom-time province, you’ve got to expect a certain amount of fluctuation in the economy. While most of us appreciated the relief at the gas pump earlier this year, repercussions were felt not only in our province but around the world. Any you don’t have to work in oil and gas to feel the effects. The majority of Albertans will be affected to some degree as this industry drives so many others.

Although markets ebb and flow in a similar fashion time and time again, it can be hard to remember their cyclical nature when faced with an economic downturn. Yet, savvy investors leverage sluggish economies rather than lament them. With oil prices still low and companies continuing to cull, now is a good time to think about what we can do to protect ourselves and take advantage of new opportunities.

Budget

Do you know where your money goes? Unsurprisingly, the majority of Canadians can’t accurately answer this. Sure we have more additional expenses like cell phones and entertainment expenses (Netflix, iTunes etc.) than we did a decade ago, but this is why it’s important to take stock regularly.

Through budgeting, you can measure changes in your circumstances while taking additional expenses and inflation into consideration. Not only is budgeting a superb tool for figuring out where your money is going, it allows you to find ways to reduce expenses and save more, eliminating debt faster.

When the economy contracts, as we’ve seen, companies trim the fat. Likewise, individuals should be doing the same – weeding out excess spending. But you can’t do this if you don’t know where your money is going.

Budgeting helps to gauge your leakage. Whether it’s $5 daily lattes, getting your house professionally cleaned or eating out a couple of times a week, measure how much satisfaction you receive from these extra expenditures – if you readjust your expectations, you’ll find many ways to reduce expenses.

Perhaps the most compelling reason for budgeting is become the type of person it creates. People who take the time to budget are typically also those who have the discipline to save.

As someone who budgets, I help my clients with this as well. I want clients to be saving for the down payment to buy their first home and the quicker they do it, the sooner they can get into a home of their own.

Looking at Your Debt

After budgeting, see if you can’t come up with a plan to reduce debt as much as possible. Many financial advisors recommend their clients service any debt prior to taking on any large investments or other strategies. Those who hold debt with a high interest rate do well finding ways to consolidate that debt so they’re better able to pay it off.

There are many advantages to debt consolidation. By using the equity in your home as security, you can reduce your monthly payments and save money on interest. Mortgage Brokers, like me, are in a good position to help you analyze the cost savings you could realize by consolidating your debt.

Saving and Investing

Obviously, now is not the time to be overly ambitious in your spending, unless you have means to get through a slowdown. With head counts being calculated with increasing frequency, individuals in vulnerable positions do well squirrelling away some money until their position is more certain.

According to Dundee Private Wealth, every individual should have between three and six months savings for all their monthly costs in the event of tragedy, job loss or other unforeseen situation.

When stocks and real estate investments are falling it’s easy to think that you need to get out yet savvy investors see this as an opportune time to invest for medium to long term gain. Don’t have a lot of extra cash at the end of the month? Follow the advice of the wealthy barber and pay yourself first. Set up a monthly savings plan that will transfer money as soon as you are paid.

Those with a higher risk tolerance for risk might want to consider an investment loan. If you confidently predict you’ll see a higher return than the interest on the loan, this might be an option for you.

Look to the pros

You’d be surprised how many people don’t understand their finances. Entrusting someone to help you steward your finances is easier said than done; however, referrals are your best bet for finding the right fit. Talk to me, friends, colleagues you respect and ask them who manages their money. If they’re happy with the service, you’ll know! Interview financial advisors and don’t be afraid to trust your gut – investing is dependent on your personal strategy and goals.

Diversification

How do millionaires ride out rough economic times – for example, the Walmart heirs have lost over $50 billion since January this year? Simply put, diversification. Rebalance your portfolio, making little adjustments so you stay on the right path.When markets pull back it creates a long term buying opportunity for both stocks and real estate.

And, despite the skewed view of the media, try not to worry so much about oil. Other sectors will flourish when oil is down. When a person is well diversified in many extras and wealth management techniques, they’ve developed a great defines to be able to protect their wealth in turbulent times.

On the house

Mortgage Brokers wear many hats and during slower economic times our role as an educator is even more valuable.

Most people recall history based on recency. Most homeowners and homebuyers think snagging a mortgage rate under 3% is normal. Along the same vein, homeowners also think that their home should appreciate a lot faster than in reality – normal is between 2-4% per year.

A Calgary Mortgage Broker can educate and have conversations about financial health, housing needs and your vision for the future. We can then better gauge if now is the right time for you to move up or out. The mortgage is just one piece of the financial pie.

A little perspective

We all know the world didn’t end in 2008. Markets bounced back, consumer confidence rose again and housing prices didn’t flat line for years on end. Also, Alberta’s economy is not as tied to the fluctuations in oil and gas as it was over ten years ago – it is a much more diversified province with our green energy sector now surpassing the oil stand for total number of employees.

So take a step back, shut out the noise from the media and look back to how we’ve overcome volatile economies in the past. Take stock of your situation and if you aren’t comfortable managing risk properly, find someone who can help you.

This too shall pass – has the world every demanded less energy?

Source: AMBA.ca