Thinking About TFSAs

I just wrote about my TFSA last week here on my blog and then I got into talking about them over on Trent's blog too.  In fact, I had to deal with a commenter who both twisted what I said and told everybody I was wrong!  Uh, no.  Actually I wasn't.

In case you don't want to go over there and poke around the comments, here's the story.  Trent responded to someone who asked him about opening a Roth IRA and using it as an Emergency Fund.  He was against it, because the Roth has a $5,000/yr limit that expires at the end of each year (instead of being carried forward like a TFSA).  Trent's point was that if you deposit $5k and then use it for an emergency you can't put it back.  You've lost that year's contribution and that $5k is gone from your retirement account forever.

Several others pointed out that you might not have an emergency, and then you'd be ahead whereas if you had the emergency you wouldn't be any worse off than if you hadn't opened a Roth and had just put the money in an Emergency Fund.  I chimed in to talk about how a Roth and a TFSA are similar but different, and how you can take money out and put it back into a TFSA.

I used the example of someone with a $5,000 contribution limit depositing $2,500 then withdrawing $2,000 for an emergency.  I said this person could replace the $2k this year.

Kevin then jumped in to say:

In the interest of avoiding any confusion, I just wanted to correct Shevy’s inaccurate information regarding the Canadian TFSA accounts. Some of his information is completely wrong.


The TFSA does indeed have a $5,000/year contribution limit, and any gains in the account are tax-free, like a Roth IRA. Contributions are not tax-deductible. Shevy is correct that you can take money out, without penalty. Where his information goes off the rails, however, is his suggestion that you have to put the money back in that same year. In fact, it’s exactly the opposite. You CAN’T re-contribute the money that same year. You can put it back, but you have to wait until the next year to do so. Money you withdraw is added to next year’s contribution limit. Unused contribution room rolls forward.

Thus, to correct Shevy’s example, say you contributed $2,500 to your TFSA in year 1, then had an emergency that required you to take out $2,000. Assuming you don’t do anything else in year 1, then next year, your limit will be $9,500 ($2,500 unused contribution room from year 1, plus the $2,000 you took out in year 1, plus your new, $5,000 limit for year 2).

So, of course, I went back to correct all of his errors, starting with where he mistook me for a guy!

First of all, there's a world of difference between being able to do something and being required to do it.  I never said the person had to replace the money that same year but they could if they wanted to.  Why?  Because the person still had enough contribution room to be able to do it.  In my example the person would have used $4,500 out of his or her $5,000 contribution room (and would have had $2,500 in the account at the end of the year).  There are lots of good reasons for wanting to put the money back as soon as possible, interest being only one.  Perhaps the person had to pay for something and then got reimbursed by insurance.  So it really should go back in and, if it doesn't, maybe it will end up getting spent on something else.  It's a way of focusing on savings and making them a priority.

Kevin is only right that you can't repay the money in the case where you've already used up all your contribution room.  For example, if you put $400/mo into your TFSA and then have an emergency in October that costs $2,000 you won't be able to repay it until next year.  Why?  In October you have $4,000 in the account and you have another $800 that is scheduled to go in over the next 2 months.  If you put the $2,000 in you would be over the limit for the year by $1,000 right away and by $1,800 by the end of the year.  CRA charges 1% tax per month on the overlimit amount so that's a very bad idea.

You could put $200 back (bringing you right up to the $5,000 limit) and put the other $1,800 back at the beginning of the next calendar year or you could just wait until January to redeposit the whole $2,000.  In January there's another $5,000 limit, plus anything you didn't use from a previous year, plus the amount of any withdrawal you made.  So, every year the amount people can have in their TFSAs grows by $5,000 and in 10 years time everybody will be entitled to have $50,000 in their account (regardless of how much they actually deposited or withdrew during that decade).

The thing is, how many people are really fully funding their TFSAs?  In fact, how many people even opened one in 2009 when they first became available?  As I mentioned last week, I'm certainly not fully funding mine with $50 per pay period, especially when you consider that I'm one of the ones who didn't open the account until 2010 (so my contribution limit for this year is $10,000).  I think a lot of people who are struggling aren't able to fully fund anything, whether it's 18% to their RRSP or $5,000 to a TFSA or whatever the current maximum to receive the full government match is in an RESP, or even the 1/3/6 or more months we're all encouraged to have in an Emergency Fund.

So what's an average Joe or Jane to do in this circumstance?  I think the first thing is to start paying down debt.  Then open a TFSA and put whatever you can in there.  It could be $10 per week or $416.66 per month or anywhere in between.  If you have a baby, open an RESP right away and start putting something into it.  I pay $50/month into an RESP.  If you've fully funded your TFSA for the year and you have contribution room left over from a previous year, I'd keep going with that.  Otherwise you should start a separate Emergency Fund.  Once there's $1,000 in the Emergency Fund (and your TFSA is still fully funded) you can split the deposits that were going into the EF in half.  Half still goes into the EF, the rest can go into an RRSP.  As you finish paying off each debt, snowball it into the remaining debt.  When you have no debt other than mortgage you can split the debt repayment money between paying down principal and adding to your RRSP (up to your contribution limit, of course).

Sounds so easy, doesn't it?  But I'm still in the very early stages.  I'm paying down debt.  I have a small TFSA and a smaller Emergency Fund.  I have an RESP for my daughter.  I have RRSPs but I'm not putting anything into them at this point in time.  The money in them is still earning interest though.  I prefer the TFSA to the RRSP because of the flexibility inherent in it but I think each has a place in my retirement plans.

February Goal Review and March Goals

Yes, it is a new month and yesterday was payday.  Sounds like a good time to see how I did with my February goals and maybe set some new ones for March.

First of all, what were my goals for February?
1. Pay for Dear Child's birthday party.
2. Pay at least $229.75 to MasterCard
3. Stay current with all the other bills.
4. Get the treatment plan for DC's dental surgery and figure out how to pay for that.
5. Make arrangements for Dog's Passover vacation and pay at least $100 towards that.

Those sounded pretty reasonable.  How did I do?

1. Dear Child's party was held at the community centre with an hour in the gym and then food upstairs.  Given that my Eldest Daughter's baby was overdue at that point and we were doing renovations both upstairs and down at home, it was the only logical choice.  She didn't have a party the previous year and had been promised a nice one this year.  I charged the party on my MasterCard and paid for part of it in February.  I finished paying for it today.
2. I made a number of payments to MasterCard in February, as well as at the beginning of March.  I paid both the $229.75 and $90 (my regular payment) on 17 Feb, then paid $62.50 towards the cost of the party on  the 22nd or 23rd.  I paid another $90 yesterday and $400 today.
3. I am current on all the usual bills like internet, water, credit card, cell, set-asides into my credit union account, ING emergency fund, etc.  It feels good.
4. Dear Child had her surgery and I charged the first of 3 monthly payments for it to my MasterCard at the beginning of the week when the surgery took place.  The total bill was a little under $1,800 and each payment is between $500 and $600.  $200 of the $400 I paid today was towards the dental charge.  I'll have more to put towards it when my hubby gets paid again.  I want to pay each dental charge off before I charge the next one.
5. I wrote to reserve Dog's place today and will send a cheque for $100 once I hear back.

All in all, I did very well!  Now, what do I want to choose as goals for March (bearing in mind that Passover falls at the end of March this year and is both hectic and expensive).  Let's keep it very simple.

1. Stay current on my bills this month.
2. Pay at least half of the cost of Dog's vacation ahead of time.
3. Pay down the cost of the first dental charge before the end of March.

I could add more, but I know just how much of a challenge those will be.

In addition, I'm on track with my TFSA.  I've been putting in $50 each payday and it's currently sitting at $250.18.  I've also got an automatic transfer of $10/week to my ING Emergency Fund.  There's $251.56 in there as of today, close to half the $520 I listed as a goal for the year.  Yes, I realize it's not enough but the money in the TFSA can also be taken out for any reason at any time, so it can also function as a sort of emergency fund too.  I'll be happier when I have at least $1,000 put away between the two funds but right now I'm just trying to find some kind of balance and form regular habits.

Surgery Update

Just a very short post to say that my Dear Child had her surgery Thursday morning and came through it beautifully, Baruch Hashem [thank G-d].  She was nervous as this was her second surgery and she said she felt the anaesthesia line being inserted last time, but she was very brave.  I cuddled her and encouraged her to blow bubbles while they put the line in today (her hand had been pre-numbed by a topical) and she didn't seem to feel it this time.  Boy, they go out fast though.  One second she was giggling and telling the nurses about Dog and the next we were easing her down on the table as her eyes rolled back.

She's doing really well.  We gave her one dose of Advil when the freezing and painkillers they had given her wore off but she hasn't seemed to need any more.  I went out and spent more money than I should have on special soft foods for her (cottage cheese, ice cream, juice, soft fruits) but she can't eat regular food for a couple of days, just a very soft diet.  I'm going to make tuna quiche (one of her faves) for Shabbos lunch and we'll have fish fillets and mashed potatoes for Friday night.

I can't believe Purim starts when Shabbos ends!  At least today was an easy fast (the Fast of Esther gets pushed back to Thursday when Purim is Sunday because we don't fast on Shabbos unless Yom Kippur falls out then).  And Dear Child can say she fasted too!  Normally kids don't fast until the year they hit Bar or Bat Mitzvah but she had to fast from midnight on for the surgery.  Actually, she did have about a third of a glass of water through the afternoon, a sip or 2 at a time, but that's all.  She had a strawberry banana ice cream smoothie for dinner.  And she's looking forward to a visit from the tooth fairy tonight.  She got $5 each time previously when she lost a tooth and they extracted 4 teeth today (among other work).  Hubby asked her how much money she'd be getting and she said $20 right away!  Pretty good math skills for a 7 year old!

Poking My Nose Out for an Update

I feel like the poor old groundhog, scared to look out for fear of seeing my shadow.  My last post was 10 days ago and I talked about the necessity of creating a Pesach cleaning plan and making myself accountable.  Then I disappeared.

Well, life happens.  Specifically, new babies happen!  No, not mine.  My Eldest Daughter's.  But combine a new baby (and one whole night with no sleep while my daughter was in labour) together with 3 little girls who are off school, the Olympics, two kiddie birthday parties, various and sundry family members and close friends traipsing in and out to see the little guy and, well, you get the idea.

What, if anything has been done?

Well, my son-in-law and his dad did get the drywall down, fixed what needed to be fixed, and then put up the drywall again.  It still needs taping, mudding and sanding before much of anything can be done in Dear Child's room.  I did go through the big bin that had been stored but Dear Child was thrilled to see most of the items after 3 years, my hubby vetoed getting rid of certain other items and it's still 3/4 full.  Sigh.  Honestly, I think she could have lived without the baby doll, the baby Cabbage Patch and 2 big stuffed Care Bears at the very least!  I know some will say that I should have gone through the bin by myself or forced her to give away more, but I've been on the other end of it and I still recall how upset I was (back when I was about 11).

Other than that, I've done a lot of laundry and hung up more of DC's things (in my closet) and I started sorting out paperwork that's stacked on the trunk and table (in an area I'm not supposed to even be in yet).  I also started to make a detailed list in excel based on a spreadsheet I saw elsewhere.  I worked on it for about 2 hours and was very satisfied with it.  I just wanted to add another worksheet for Things To Buy, so I did that and tried to edit the tab of the worksheet to say "To Buy" and excel totally messed up on me at that point.  It tried to tell me there was something wrong with what I was calling it (there wasn't), and listed that it couldn't be more than so many characters, no special characters and couldn't be blank.  It wouldn't let me get out of the tab, wouldn't let me switch to another sheet, wouldn't let me save, wouldn't even let me close excel!  It took 2 tries using Task Manager to eventually force excel to close.  Needless to say, I lost the entire thing.  I was not a happy camper and went to bed that night in a huff!  The next day I recreated it from scratch and successfully saved it.  In fact, I improved on the format, but I still didn't like having to do all that work twice!  And, of course, that was a "planning the work" segment.  Still have to work the plan!

As for money, I've been paying my bills and trying to get the MasterCard back down to where it was before.  I did pay off the flooring I bought but then ended up having to charge DC's birthday party, which was held out of the house for what should be obvious reasons!  I've since paid down another $90.  That pretty much covered last month's interest charge ($91.43).  Then I paid part of the money for the party but have to wait another couple of weeks to finish paying that off.  And, today, I charged the first 1/3 of DC's dental surgery.  We're paying it in 3 payments, each a month apart.  I'm hoping that my hubby will get paid the commission on a couple of bigger jobs he's done recently by the end of March.  Then we can pay the surgery off and be done with it.  The good news is that it turned out to cost considerably less than originally anticipated, about $1,700 when we'd been led to expect that it would be about $3,000.

Right now I'm just trying to get through the week until Thursday, when the surgery takes place.  And take baby steps on my cleaning plan until then.

Passover Planning

Okay, this is what I was talking about the other night when I was suffering from caffeine-induced insomnia.  Passover starts the last week of March and it's already almost the middle of February.  My house could politely be described as a mess.  We clean for Passover so that we don't have any crumbs anywhere (because we have to get rid of all leavened products for the duration of the holiday).  Generally, people also do a lot of other cleaning and tidying at the same time because it helps you find the leavened stuff (called chametz in Hebrew).  Right now, I'm hard pressed to even find any horizontal surfaces in my home (including most of the floor) because everything from my daughter's room is all over everywhere.

I have bins of Barbies and stuffed animals, trays of art supplies, boxes of school projects and clothes, her globe, baskets of books, etc. etc. all over my living room.  Most of the bins look like they've thrown up their contents.  Then, I have her little table in the middle of my kitchen, the chairs in the living room, her comforter across the foot of my bed, her hanging clothes in my closet and her laundry on the floor by the foot of my bed. Oh yes, and her lamps on my dining room table.

My Dear Child's room is still empty and taped off.  My Son-in-Law got to the point of replacing the ceiling drywall but found that it didn't all meet up evenly and that he couldn't find a place to sink some of the necessary drywall screws.  His dad was in town for just a day or two, so didn't have time to work on it but the problem apparently also affects the kitchen floor upstairs.  They need to remove the new drywall, do something up above and then replace it.  Of course, after that the drywall will need taping, mudding and sanding (at least a couple of days, what with the mud needing to dry in between).  Then he's going to texture the ceiling (which I loathe, but he says he can't do an even enough job to look totally flat, so the texture is necessary) and repaint some of the upper parts of her wall that got damaged during the process to date.

Unfortunately, his dad won't be back until after Eldest Daughter has the baby (any day now, so he'll probably return within the next couple of weeks) and I can't put in the new floor until the ceiling is finished.  I don't want paint or drywall compound or drywall dust all over my new floor!  And the floor isn't a single evening project.  Did I mention that I can't put anything back in the bedroom until both ceiling and floor are finished?

The original plan I made for Passover had me finishing the floor and refilling her room by Jan 31st, spending the next 2 weeks on the living room, 2 weeks on the foyer and 3rd bedroom (including tiling the floor, moving furniture and assembling a wardrobe we've had for about 2 years already), 2 weeks in the master bedroom and, finally, 2 weeks in the kitchen (and adjacent bathroom) and also included doing tiling and replacing cabinets and counters!

Okay, it was ambitious.  Very ambitious.  I'm now at the point where I should be finishing the living room and I haven't started anything because of the whole situation with the bedroom!  I'm frustrated and that's part of what's holding me back.  Realistically, while I can't do many of the things I'm supposed to be doing (or should have already completed) there are small areas where I could do something.

For example, I could clean off the mantel and a couple of the bookshelves.  I could try to clear off the chaise longue (although I'm not sure where I can put DC's coats) and I could buy the wooden frame from IKEA that is meant to hold her bins.  I could assemble it, empty and clean the bins, then only put cleaned and checked toys back into the bins.  Then those toys would be off limits until Passover (the hard part).  I could also go through her big bin of toys that's been sitting in storage and is currently in our 3rd bedroom.  Most of those toys have been outgrown I think and maybe I could get rid of a bunch of them.  Then any toys I'm not willing or able to clean for Passover could go in the bin.  Those toys could be played with in the interim and then the bin could be sealed shut and sold for the duration of Passover.

On the reno front, I could rip out the carpet in DC's room and lay the DriCore (because it doesn't matter if it gets paint or dust on it).

So, here's a basic revised plan, week by week:
1. Starting Sunday, work on accessible areas in the living room and do the floor prep in DC's room.  Work on the bins and toys.
2. Work on the living room areas that are revealed when I move the toys.  Clean up the part of the foyer where we put the shoes & DC's backpack.  Once Hubby reorganizes the shed, move the boxes that belong there out of the foyer.  Rip out carpet in 3rd bedroom and move big items around in it.
3. Tile & grout the floor in the foyer and 3rd bedroom.  Move the furniture into their final places.  Build the single wardrobe.  Move my grandmother's trunk from beside the table into the 3rd bedroom.
4. Work on the master bedroom.  Do floor in DC's room (by this time the ceiling had better be fixed!) and move all her stuff back in.
5. Finish the master bedroom. Finish the living room. Start work on the kitchen, beginning with table area and corner by bathroom. Clean fridge.  Box up stuff to be sold for Passover (regular dishes, pots, etc.).
6. Continue work on the kitchen, whether I'm doing a reno or scrubbing out the existing lower cabinets.  Do reno the upper cabinets at least so we'll have a place to put the Passover food (since the pantry cupboard is the one that fell apart a few months ago). Clean stove.
7. Finish up the kitchen on Sunday the 28th and start cooking for the seders (Monday & Tuesday nights).

Just looking at all of that is pretty scary.  Remember, we're also going to have a new baby upstairs, I'm planning to go to the house for a couple of days during the 2nd week, Dear Child is off school until the end of the Olympics, she's having dental surgery on Feb. 25th and we'll be busy with Purim on the 28th (of Feb.).  Oh right, and I work!  But I don't have any better ideas.  If I don't at least try to work this plan I won't be ready at all and what will we do then?  Move out for the duration of Passover?

So, plan the work, work the plan.  Rinse and repeat.

Thinking Out Loud

Note to Self:  Don't drink Snapple.  No matter how good it tastes.  No matter if you're thirsty and are eating something spicy.  Remember.  Caffeine=No Sleep.

Windows has decided that it needs to do a big update in about 9 minutes, so we'll see how fast I can write a post.  Given that it's a little after 3 am and I haven't been to sleep yet it may not be terribly coherent, but what's life without a challenge or two?

Speaking of challenges, I really have to start writing about my plans for cleaning up the house.  Oh, and I have to actually clean too!  Really, the reason I need to blog about it is that I need to be held accountable.  Things are just really rough right now, work on Dear Child's ceiling is stalled, a lot of other things are happening right now and I'm not getting any cleaning done.  Or any reno work.

I'm trying to decide how best to procede because Passover comes very early this year and I have a ton of work to do.  I'm going to go think about it now (until I can sleep) and write more tomorrow (or later today).

Review Day & February Goals

It was Wednesday.  It was payday.  And my Hubby had transferred money to my account.  Guess what I did this morning before breakfast?  I paid bills, of course!

That made me think about my goals for the year.  How am I doing with those?  What should I work on this month?

Overall, I'm doing well with the money.  Both the Home Depot payment plans are history.  That's just over $1,500 worth of debt we've paid off between about November and now.  I have post-dated cheques for another debt we're chewing away at and I'm on track with that.  I've opened a TFSA and there's already $150 in it.  I have $10/week going into my ING Emergency Fund.  No, that's not a lot but it's going in there nice and regular.  The IKEA account is all paid off and can no longer be used because they changed companies that provide the credit card services.  As of today, I think I'm current on all my bills.  The one thing I still need to do for this pay period is to go to the credit union, take out $45 in cash and then deposit it into my other credit union via the ATM.  That's the set-aside money each payday for my electric bill, garbage, property taxes and fuel oil at our rural home.  Next winter, when it's time for a fuel oil delivery, I'll have the money all saved up.

On the other hand, I've been charging stuff for the city house on my MasterCard.  In fact, Capital One put a fraud hold on my card after the third time I used it in 2 days!  What did I buy?  I spent $20.11 at IKEA on 4 D cell batteries, 10 votive candle holders and a pair of sheer drapes (2 panels).  I bought $129.37 worth of DriCore (including a levelling kit) at one Home Depot and, the next day at a different Home Depot, I spent $229.75 on tiles for the foyer and 3rd bedroom, as well as concealing film for the bedroom windows, a closet pole that will fit Dear Child's closet at the rural house (it's an odd size) and a grouting sponge.  Bad?  Not really.  I had to buy the reno supplies before the end of January to be able to cash in on the home renovation tax credit.  And I needed the supplies to finish important projects that will make our part of the house a lot better looking.  Plus, I've paid down $149.48 of that already today.

The fraud thing was actually pretty funny.  I've barely used the card over the past year or more, so 3 transactions in 2 days was obviously suspicious!  I got that all straightened out with a quick phone call.

What are my goals for February?
1. Pay for Dear Child's birthday party.
2. Pay at least $229.75 to MasterCard
3. Stay current with all the other bills.
4. Get the treatment plan for DC's dental surgery and figure out how to pay for that.
5. Make arrangements for Dog's Passover vacation and pay at least $100 towards that.

Got any goals for February that you'd like to share?