Approaching my 28th month in Alberta
If you’ve been following my posts, you’d have learned that I once came here to work the oil patch, make some money, and go home. Now 27 months later, I’m still here.
The last time I wrote was earlier this winter, around when the price of oil took a deep dive towards $40s/barrel and when the mass layoffs first occurred and I sat for 7 weeks without work. I thought that was the end, and then my fortunes quickly reversed when I found a job that allowed me to clear around $10000/month after tax to reverse the financial damages and get myself on my feet again. Unfortunately, spring breakup happened earlier than expected in my area of work- early March instead of end, and since we worked on ice roads above muskeg, there was no stay. So back I went to Edmonton, laid off.
Shortly before I was laid off, I received 2 job offers. By the time I was back in town, one of the companies was not so busy anymore, so I went to the other for shutdown work. The wage was bad, but it was work. I quickly learned that working below your market rate did not equate to better job security. In fact, the reverse was true. You find a place where people were generally inexperienced, lazy, and/or idiots. They tried hard to show a face of professionalism, but it was an outfit where work was disorganized and did not require much brain power at all. Just by talking to the people there they were types who were just grateful for a job as they could not find better. Some were out of province with no Alberta address so the company could use them as cheaper labour versus local labour, as they would not be open to the local job market as much. Or, they did not know the market wages for what they were doing. Generally though, it was filled with types unskilled that would make perfect fodder for bodies to charge the oil companies for. In essence, that’s how these companies functioned, as they’re paid either piece-rate or a flat rate to have a certain number of bodies on site for menial work. So, they didn’t want anyone smart, skilled, or very experienced for that purpose, as if they were, they would leave, leading to increased turnover cost. They even made the workers sign contract allowing the company to subtract $1500 from the final paycheque if they quit or get terminated before the seasonal period ended as an incentive to stay. To summarize: after the $1500 loss, I pocked $4700 and moved forward in less than a month.
Three days later, the construction company I worked for last year offered me work to run a water truck. There was a more experienced driver there showing me what to do with it with that certain crew. We had a conversation about real estate and oilfield work, but he took it the wrong way, perhaps out of jealousy, especially after he saw my car. So, reporting to that supervisor, he used the excuse that I received a text on my phone and quickly looked at it before putting my phone back, to not use me for that contract, as I violated the “No Cell Phone” company policy. I did not get fired, but just had to wait for the next piece of work to start. The search for work continued from there on (this was mid-April).
An additional struggle was that Gold’s Gym sent me to collections for not being able to take membership dues out of my Visa card that had expired recently, dropping my credit score by 100. So I paid an unusually large amount of fines to clear the account, and then proceeded to closely monitor my credit on a regular basis, to prepare myself to buy my first home.
Frantically I looked for work, sitting in coffee shops everyday looking up contact information for local oilfield services and electrical companies, and then either calling them or going to the offices in person. Eventually I learned that the trades are very close-knit- usually all family and friends. It was difficult for an outsider to get in. By early May my old construction company had called me back, so I went back to work with them to low bed heavy equipment.
This year because of the fall of oil prices, instead of re-hiring 2 other people on our crew, they decided it would be less expensive to perform one of their roles also. I’ve considered returning to the oilfield for the higher wages, but instability would kill my income quick. Construction work paid a lot less (usually mid $20s, versus mid to high $30s), but the work is much more consistent and in larger amounts in the summer. In the last 3 months, at the time of writing earnings have been about $28,370, with a small tax-free portion provided as a living allowance when working out of town.
In the medium-term, I decided to stay in my current line of work as the pay is consistent and hence accomplish the following:
(1) Get a mortgage, as job and income stability and status as a full-time, not probationary, employee, improves my prospects.
(2) Semi-postpone working on my electrician apprenticeship, as my current income is still relatively high and paramount for building up savings beyond the home downpayment. Then after collecting even more savings from a steady winter of oilfield work, finally tackle the apprenticeship, as I would had built adequate savings to reduce debts, cushion sudden expenses, pay for tuition, and cover a budget deficit in case during the beginning stages of my apprenticeship the companies only wanted to give 8 hours/day of work. If that is true, I would incur around a $1000/month deficit.
(3) Have one more thing to show after my 27 months here in Alberta. The first home in essence is planting my roots. Regardless of what happens to me in the future, at least then I will have accomplished something here.
2 years ago I made a boast was to obtain a Porsche, a home, and my completed education (I was a 4th year Math and Economics university student) by the time I was 23. It may be still possible to accomplish that goal by then, albeit it’d make little financial sense and be painful in the grand scheme of things, and originally I planned to complete it in Finance- instead to meet the time constraint, it may had to be in something else, as certain courses have certain prerequisites offered only at certain times of the year, subject to seating availability. Suppose I did, theoretically follow through with that objective, then my plan during the next year and half would be something along the lines of this:
2015 Fall: Continue working in construction to build around $5000 savings (would be a bit over 6000, but need about 1300 for electrician tuition and books), get $300k condo.
2015 – 2016 Winter: Work the oilfield to collect 20000-30000$ of savings. Take $25000 as average. This considering work is steady of course.
2016 Summer: Sell current BMW and use proceeds and 2015 Fall savings towards Porsche of around similar new MSRP. Do construction work to save about $9000 more. Rent out property.
2016 Fall: Student funding pays for tuition, savings of $34,000 will be more than enough for living costs and keeping the car running during last year of degree.
Obviously a financial drain, as savings would probably be around $10,000 at degree completion and degree would likely not be used for looking for relevant work.
My current car goes for a similar Porsche price-tag, so aside from a 911, the incentive is not overwhelming. Education is a foggy area, as what I defined as the ideal education has changed a couple times after working in different industries. In terms of education amount, the result would have been about the same, time/effort-wise- just instead in one thing, it ended up being in different things (electrician + math and economics university + trucking).
So for now, to summarize, I’ll stay trucking/running heavy equipment for the fall. Then do my oilfield grind in the winter. Then try my best to find a company to take me on as an apprentice after. For now.
Now for the long-term, I have daydreamed about 2 possible objectives:
(1) Increase net worth by $100K by Age 25
(2) Acquire $1M worth of rental properties in the next 5 years, or a $700K portfolio of rental properties and stocks; 500K rental properties, 200K stocks
I am currently 22; so to accomplish #1 implies a net worth gain of around $33K/year in the next 3 years. If winter oilfield work is consistent and saving $25,000 a winter for the next 3 years continues as anticipated, then 75% of this goal is already achieved. In the next 3 years, for a $285K mortgage, about $25K would have went towards the principal with a 2.69%/5 year term. Appreciation is not factored in as if I were to sell and get another property, other properties would have appreciated by a similar proportion anyhow.
For #2, it is more difficult, as it requires $200K cash for either portfolio. Stocks would be on 50% margin, and properties with 20% down. This would mean I would have to increase my assets by $40K/year to reach the objective in time, which implies a monthly saving rate of $3333/month. At my current income, this is possible provided work remains steady throughout the year, but having to suffer an income drop for my first 2 years of my apprenticeship hurts my chances, as I’d be lucky to break even during that period of time. Brainstorming:
Assumptions:
- 1 stocks purchase a year to simply calculations.
- Stocks don’t crash at the end of the 5 years and maintain overall average 8%/year gain
- Personal budget remains consistent at $4000/month
- Tax returns are wasted on trips/toys/other luxuries, so a flat tax rate for the uppermost income bracket is used in calculations
- Principal residence remains non-appreciated at $300K value (very pessimistic)
- Work and lifestyle is consistent (there are obvious higher-income options like camp work up north)
- No abrupt disruptions in cashflow such as accident, illness, unusual breakdown, etc.
- All numbers in present-day dollars
Year 1: $25K savings from winter oilfield. If no OT for 1st year electrical work, will suffer about a $1000/month budget deficit; $8300 over the year after tuition. This is assuming 7 months of electrical work during the year. Either getting a second part-time job or an electrical gig with OT will remedy this however. Using a 50% chance that either one of those will happen, we expect to lose $4,800. So overall, a gain of about $20K is expected.
Year 2: $25K savings from winter oilfield. Jumping to commercial after acquiring a year of residential experience, together with increased 2nd year rates, will increase income a bit. Without OT, now only about a $670/month deficit is expected. Compared to the previous scenario now, if OT or a second job is possible, there is a potential of a $330/month gain. Now the expected loss is $3,680 after tuition- which isn’t much different from Year 1. Overall a gain of about $22.6K is expected this year. Investing previous year’s gain in stocks for a 8% return puts us at $21,600; now the total is $44.2K.
Year 3: $25K savings from winter oilfield. In Year 3 if it is possible to get into industrial, then OT becomes more realistic- or even commercial work with OT- and then around $8000 – 9000 a month is possible with steady work at 58 hours/week. Taking the average of those, then every month it’s possible to gain $1,600/month. Overall this year a gain of $34.9K is expected. Adding this together with the previous $44.2K invested at 8%, we are now at $82.6K.
Year 4: Using same scenario, but with 4th year wages and same hours for 7 months, gain $40.5K from working. Adding that with last year’s invested 82.6, we arrive at $129.7K.
Year 5: Working at JM wages with same hours and work 11/12 months of the year, expect to save $42.2K approx. Add that with last year’s invested $129.7K, we arrive at $182.3K approx.
The current home now would have $42.9K approx. of equity. Losing 5% to sale commission of the $300K home, this becomes $27.9K. Add that to 182.3 = $210.2K. Now use $200K cash to accomplish objective, and then order a pre-construction house for a new nicer primary residence. Put required initial deposit to hold spot, and then in the next few months collect the downpayment. If worried about little savings, drag feet for a year until buying the nice house.
These are all theoretical plans of course, given everything turns out perfect. If you’ve worked in this industry for even a short period of time, you’d know nothing is ever guaranteed. Many people in fact end up with nothing.