Inertia Can Be A Terrible Thing

An object at rest will remain at rest unless acted on by an unbalanced force. Damned if Newton wasn't right.
Damned if Newton wasn’t right.

Those of you who read this blog regularly will know that I’ve been less than diligent with my posts recently. Baring your soul on the Internet to people you’ve never actually met seems to be the “done” thing these days, so I’ve decided to pull back the curtain and share where I am these days, in terms of my financial worries. Being able to be open about these things (and a possible upcoming career change) is one of the benefits of blogging anonymously, so here we go:

I have a grand plan for my finances, and, overall, my wife and I have made a lot of progress since we moved back to Canada six years ago. When we first moved back to Canada and I started investing in the stock market, we invested almost all of our liquid assets. Those investments aside, we were basically living month to month. There were even two or three times that we (and I consider this a cardinal sin) carried a balance on our credit cards.

Fast forward six years. We certainly won’t be on the list of Canada’s Richest People soon (OK, ever) but we’ve done well enough in the markets, and have developed a reasonable (approximately $500) monthly cashflow from dividend-paying stocks. We’ve put aside all the money we plan to for our kids’ RESP’s, and we’ve maxed out out TFSA’s every year except this year (which we will, we just haven’t done so yet).

So what’s the problem, you ask. And well you might. I know enough to know that there are a lot of people out there who would kill to be in our shoes. We’ve earned what we have by living cheaply, learning about investing, and being willing to take calculated risks in the markets, so we haven’t had very much handed to us, but I do realize that some people would roll their eyes at my current worries.

Here’s the situation:

Since moving back to Canada, my job has never been stable. I know that this is normal for lots of people, but the stability of a regular paycheque is one of the reasons I went into my current profession. Things certainly haven’t turned out as I expected. The uncertainty has been particulary hard on my wife. To make a long story short, I followed my interests and talents, and have cornered myself into a fairly specialized field that only works with direct government support; support that the government is increasingly reluctant to provide. I’ve worked in my field most, but not all, of the past six years. Barring a minor miracle, I will be laid off within the year, possibly as early as September, or as late as March; the question seems to be when, not if.

Because my job security has always been low, I’ve let cash balances in various accounts pile up. At this point, we’re about a third in cash. The quandry I’m in is what to do with all that cash. The options seem to be:

  1. Make a huge payment on our house’s LoC (this is how we’re paying off out house; we don’t have a conventional mortgage)
  2. Dive in and buy enough divvy stocks to (almost) cover our monthly carrying costs passively.
  3. Some combination of the above two.

When we first came back from overseas, we didn’t have as much money as we do now, and we didn’t think that we had much of a choice: we had to get into the market to give ourselves any chance of ever being able to buy a house and/or retire. We also had hopes that things would work out at my job, which they haven’t; I feel much more insecure now than I did when we first returned. The point is that, because of that (misplaced) optimism, we were more willing to take chances with money. Now, with the writing on the wall at work, I really feel that I simply can’t afford to make any mistakes. Rolling the dice with a few tens of thousands of dollars is one thing; with roughly 200K, it’s very different. [For those of you rolling your eyes at “Rich People’s Problems”, remember: the problem is my unreliable future income. I’m sure we can all agree that 200K is not enough money to buy a house, raise a family, and retire on.]

Normally, the go-to advice would be to put dividend earnings back into more stocks. When your time horizon is years or decades away, it’s hard to beat that approach. The thing that worries me is I may need the money much sooner, and possibly without a lot of notice. We all saw what happened when Ben Bernanke mentioned the dreaded “T” word. When the tapering begins, which it surely must, what will happen to the markets? Conceiveably, markets could fall 15-25% , and I could then need to start selling stocks to cover my family’s basic living expenses a few weeks later.

I’m at a loss as to what to do, and that most feared enemy of progress, inertia, has taken hold; I’ve been sitting still for so long that it takes a lot more conviction than normal to plunk my money down to buy new stock.

Lest you think I’m just sitting here crying in my (discount) beer, I have a backup plan in place (working construction, which I haven’t done for almost twenty years) and I am retraining for a hoped move into a career as an accountant. Those plans notwithstanding, I feel I am at a crossroads. To be perfectly honest, I would feel like a phoney doling out thoughts on financial planning when I’m in a state of paralysis myself. This, as much as the extra time needed for the courses I’m taking, as well as extra summer projects around the house, is why my production at this blog has fallen off so much recently. I hope to get back on track at some point, but I fear it will be at least a little while until I can give LoonieLover the attention it deserves.

Thoughts? Comments? Questions? Really well-paying job offers? I’d be glad for any of these.

 

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