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February 2012

The Game Changer: My 2011 Tax Return

February 22, 2012

Since moving, and going from putting $1,700 each month on debt to paying nearly $1,000 per month in rent, I have felt like a pretty crappy personal finance blogger. My current debt updates have been stagnant, as I’ve been trying to adjust to my new financial situation, and I’ve missed publishing exciting posts about reaching new increments, like paying off $10,000 of debt in 6 months.

In the back of mind, I knew what some of my financial goals were for this year, but I couldn’t set deadlines until I knew one thing: how much my tax return was going to be. On Monday afternoon, Mom let me know that my T4 had arrived in their mailbox. Being the organized (and anxious) person that I am, I was ready for this moment weeks ago. All of my other numbers were entered into my UFile account and the only thing missing was my T4 information.

When I got to the house, I ripped open the envelope, logged onto UFile, plugged in the numbers, triple-checked them and hit Results. I was so nervous that I literally closed my eyes. Is it going to be $2,000 like last year? No, maybe more like $1,700. Yea, $1,700 sounds about right. After a few seconds of panicking, I opened my eyes and read this:

tax refund

Did that make your jaw drop? Mine is still on the floor at my parents’ house. $2,756. That’s almost an entire month’s salary for me. And, when it gets deposited into my bank account (2-3 weeks from now), it’s going to make many of my goals that much more achievable.

After replenishing my Emergency Fund with the $475 I had to borrow from it last month, I’m putting the rest of this year’s return on my credit card debt. I’m prepared for commenters to tell me that I should be putting 100% of it back into savings or investments but, for where I’m at financially, that’s just not my best option. And to be blunt, I’d be a damn fool if I didn’t put it where I needed it most.

By the end of March, I will only have ~$2,000 in credit card debt. Suddenly, my goal of paying it all off by August 31st doesn’t seem so crazy…

My 2011 RRSP Contributions

February 20, 2012

Confession: 2011 was my worst year for contributing to the RRSP I opened in 2007. I’m not sure any of you will be surprised by that, considering my current financial situation, but it hurts to admit nonetheless.

In the past, I used to contribute $100 monthly. Even that didn’t always feel like enough but it helped me put away $1,200 per year (which was really my only savings). When I moved to Toronto last February, I had no idea if I was going to find a job or not, but I still wanted to contribute so I lowered my contributions to $50 monthly.

You all know how that story goes. I did not find a job in Toronto and, instead, came home 3 months later completely maxed out. I continued making my puny $50 contributions for the rest of 2011, while living at home and paying off huge chunks of debt. I wanted to contribute more but getting out of debt was my top priority.

In the end, $50 x 12 months = $600. That’s all I contributed to my RRSPs in the 2011 tax season. But the worst part is that I can only write-off $450 of that.Why? Because I paid for the rest of my education using the Lifelong Learning Program (LLP).

The LLP lets you pull from your RRSPs tax-free, to pay for post-secondary tuition. This is the reason I’m going to graduate with $0 in student debt. But, when you use the LLP, you cannot claim any contributions  made 90 days before the date you pulled your money out. For me, that’s $150 I can’t write-off this year.

So, my 2011 contribution was only $450. That’s half a month’s rent!

2012 is not going to be a repeat of 2011. I’ve already changed my contributions from $50 monthly to $50 bi-weekly and, when my credit card is paid off, I plan on making that $75 or $100 bi-weekly before the year is over. And can you imagine how much I’ll be able to contribute when my other loans are paid off!? Ok, I’ll stop daydreaming…

Did you contribute to RRSPs this year? If not, you still have 10 days to do so!

Friends and Finances

February 17, 2012

I have noticed that, starting around age 24, many of your existing friendships begin to change. By then, most people stop thinking it’s fun to smoke a joint and start finding better things to do with their weekends than binge drink and eat junk food to cure their hangovers. If rings aren’t already on fingers, many people start getting into more serious relationships. And the once taboo topic of kids is often brought to the dinner table.

Along with these obvious factors, I believe that the different paths we are all on lead us to our individual spending and saving patterns. Unfortunately, the varying opinions that come from this could be another reason some friendships dissipate. When you’re broke, people grow tired of hearing the same excuses and start looking for friends who can afford to go out and spend money. At the same time, you yourself may want to hang out with more people who are trying to live a minimalist life, or at least just know how to save money rather than spend it on frivolous things.

Personally, I know my debt has affected more than one of my friendships. In June, when I finally learned how to say no to things I knew weren’t as important as paying off my debt, people slowly stopped asking. I didn’t want to go shopping, I wouldn’t want to go for dinner once/week and I couldn’t afford to go on a vacation. It didn’t help that work/homework/side work were taking up a huge portion of my timetable but, in the end, my replies were often related to my financial situation.

Can I blame friends for getting sick of hearing the word no? No. Especially, since only a few of them knew I was focusing on the numbers in my bank account, while many others were left in the dark about it. But does it hurt? I’d be lying if I said it didn’t. I don’t enjoy saying no to shopping trips, or to visiting friends in Vancouver or saving up for a vacation. I want to do all of those things! But I can’t make any of them priorities over getting myself out of the situation I am in. And I can’t ask people to wait around for me, while I do…

To help myself move past lost friendships, I try to imagine that each of us is a car on a road trip. On certain stretches of the trip, you will be surrounded by other cars. You’ll hang out every day and support each other, especially during some of the long hauls. You’ll all stop when one car needs to refuel or another breaks down and needs a few days to get better. But on your road trip, there are also a number of exits. And some of the other cars may take an exit sooner than you expected. You can miss their company but don’t stay mad at any car for leaving. They just need to continue on their own road trip, to reach their final destination. And their purpose was to help you reach yours.

I hope everyone has a great weekend, xo