re-assessing my financial decisions


I have been re-assessing my financial priorities and decisions lately.

There is an incredible satisfaction coming out of achieving a financial goal; now I have a great budget that works for me; my chequeing account is on the positive side; my emergency fund (aka TFSA) has a good sum of funds accumulated; and I have increased my biweekly RRSP contributions (to take advantage of the low market and to pay off the HBP faster) as I am getting a little salary increase in April.

I have another little increase coming up in September. My plan is to put the extra amount into my mortgage. So I will increase the biweekly payment beginning of September. I am feeling good about this, too.

I have been trying to project my next year and what I would do with the money I would save over the year. Would I increase my mortgage payments? My RRSP? Or my TFSA?

I am not sure what would be the best for me; they all have cons and pros. A balanced act would be desired I guess. Here are the cons and pros I can think of:

RRSP (registered retirement saving plan):

How would I would like to make the extra contributions: Lump sum contributions to directly pay off the HBP (home buyers plan withdrawal that I have had as a part of my down payment).

Cons: Once the contributions are done, I may not have access to these funds unless I take the risk of penalty of early withdrawal.

Pros: The market is down and it is the best time to make investments for long term. Plus, I gotta pay back my HBP anyhow (i.e. I consider it debt), so early payments are better.

 

TFSA (tax free saving account): 

How would I like to make the extra contributions: Lump sum contributions. I have still contribution room, which I believe will take me another 3-4 years to maximize with the amount of contributions I make now.

Cons: none that I can think of. I am just not sure which one is better; to contribute to TFSA or to RRSP/mortgage? I am inclined towards RRSP or mortgage payments more than contributing to TFSA at the time being. But, this is likely to change over time.

Pros: TFSA is liquid and I can have access to it anytime I want. This gives a huge peace of mind as I may need money for emergencies or important things, like serious home repairs. So, if I have a surplus of funds and nothing better to do, why not to invest them in TFSA? My current TFSA plan is extra safe; it does not earn much but it does not lose much, either. I am opening a new one next week which I would like to be a little bit more aggressive (high risk category). It will be small at the beginning but I am planning to contribute to it from now on so that it may have a chance to grow over time. This TFSA will be hopefully for long term investment.

 

Mortgage payments:

How would I like to make the extra contributions: I would like increase my mortgage payments over time. I am thinking from September on, if things go ahead as projected, every time I get a salary increase, it would be nice to increase my biweekly payments. One thing I am scared of is whether or not in case something happens I am allowed to reduce it. If that is not possible, then the lump sum payments seem to be the best option.

Cons: Once the funds are paid, I may not have access to them in case I need liquid funds. That is why my TFSA accounts are so important to keep healthy.

Pros: Knowing that the debt is reduced and there will be a better motivation for me to pay it off in a shorter time. There is a psychological part that works for me; if the debt is small, I can get more excited and committed to pay. I am not sure when I can fully pay it off, but I hope it will not take longer than another 10 years.

 

And how am I going to find out whether I have extra funds to supplement my RRSP, TFSA, or mortgage payments (if lump sum)?

That is where the chequeing account becomes important. I would like to ideally keep around $5K in it to be able to handle the fluctuations in budget and extra/unexpected needs. But, whenever it is bigger than that I can decide to make the lump sum payments. The best time to decide is the fall; between September and December. I have some lump sum payments in summer and then in December (for insurance and others). That means after these expenses if I still have a surplus in this account, then I will have an opportunity to make lump sum payments to my choice among RRSP, TFSA, or mortgage. Then in winter, I can start saving and accumulating for the coming lump sum payments for insurance in summer and December.

I guess that is a good plan for now. I hope things will move on as I project them. If not, I am ready to re-assess and adjust.

All is well for now.

 

8 thoughts on “re-assessing my financial decisions

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  1. Looks like you’re doing great financially! We’re opting to pay the minimal required for the Home Buyers Program per year, as it doesn’t result in a tax break for us. So we’ll designate the required amount for the HBP and the rest as RRSPs so we can hopefully get a nice tax refund!!! I’m anticipating a decent refund this year, so hopefully that’ll go to fast-tracking paying off our debt from me not working for 1.5 years. We’re still far (just under $12,000) from finishing it, but we’re on track to having it paid off before the end of October if we can pay off $400/week! 🙂

    Liked by 1 person

    1. As a family when one of the spouses is not working, it must be hard, so well done with your financial freedom!.Your RRSP plan is very wise. Since I have the company pension plan contributions, I cannot contribute much to my RRSP myself; so each year I contribute what I can and get the tax break (which always feels good). This year I did not make use of it yet (planning to pay a lump sum payment in summer with it). Enjoy the freedom your tax return will provide you by hammering that debt! 🙂

      Liked by 1 person

            1. I gotta be positive sometime my friend – life is dark but we cannot take darkness all the time 🙂 but yes seriously I like it. without the HBP, i do not think I could pay my down payment without needing a mortgage insurance (which I dread) 🙂

              Liked by 1 person

              1. Yes, we didn’t buy too long ago, so prices were already crazy. There was no way we could afford 20% down, even with the max HBP withdrawal! We were sooo lucky, my parents lent us the difference which I paid a small interest on (less than a bank loan but higher than a savings account rate so it was mutually beneficial). When the condo I had bought back in 09 finally closed in 2014, we were able to sell it and pay off the difference I owed to my parents!

                Liked by 1 person

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