You have to love governments – they really know how to bring the hammer down hard on you. I was coasting along, having had a lovely May long weekend, feeling good about life, when a letter came in the mail. Not thinking too much about it (I’d paid my taxes on time, and got a nice refund to boot), I casually ripped it open and scanned through. Then had to stop and breathe in order to stave off a panic attack.
It turns out that for the past several years I had owed the government money, but I had no idea. Therefore, it continued to accumulate interest over four or five years. Good times. So now I owe Canada $4000. It’s not an insurmountable amount, but after working hard for a couple of years to build up my savings this sure seems like a kick in the backside.
After having a small crying fit (which I’m not ashamed to admit to) I sat down and tried to figure out what went wrong. After all, I wouldn’t fix it if I accidentally ended up doing the same thing later on. And boy, was it fun being a detective (sarcasm). Years ago my grandmother had passed away while I was living in Scotland. She had left all of her grandchildren a modest inheritance, and I decided to pop it into my TFSA to earn some interest. Not reading the fine print truly screwed me over – you can’t contribute to your TFSA while you are not living in Canada. So I continued on my merry way, thinking I was being responsible and setting myself up well for the future. Fast forward to present day and they’ve audited my accounts and gleefully slam me with a bill. (I’m a big supporter of paying taxes, in the sense that I think they are quite necessary. I’m not a supporter of lack of communication when money is owed and interest is accrued daily. But I digress.)
So, what next? I did what any rational, independent 31-year old would do. I phoned my parents. They pointed me towards their accountant, who gave me some solid advice, and then I put a plan into motion. First, I completely sold off all of my TFSA investments – no more interest accrual for you, government! Then, I paid off the bill (gnashing my teeth the whole time) in full. Then, I started the appeal process – because damn right I’m appealing that fucker. If I can claw back even a few hundred it would be worth it. This one’s for you Gramma! Finally, I wrote down a pretty solid plan for repaying myself that money over the next year, without sacrificing other savings goals.
Two things really stuck with me throughout this process. One was that I never really gave much thought to an emergency fund, mainly because I am in very solid employment and I have built up a good general savings fund. This process has taught me how important it is to have those savings there, whether you label them “emergency” or not. Without them I could have had a much bigger problem on my hands, but I was able to pay and not bankrupt myself. Savings are important, keep adding to them!
Second was that setbacks really come when you least expect it, and it’s important to be mentally, physically and financially prepared. The stress of this event was huge, and while I may have initially had an overreaction, it doesn’t mean that my health didn’t suffer somewhat. I had been practising meditation and breathing techniques for a while now, and boy, did they help me calm down in the moment and put things in perspective. Being financially prepared meant that I only had to cut a few little things from my budget that I don’t particularly care about that will help me repay the money over time. The more prepared you are, the smaller the problem is.
Perhaps some good will come out of all of this. I have already starting planning my repayment with a vengeance, and it has helped bring my focus back to my finances (it had become a little bit fuzzy of late). It’s also forcing me to not spend my money while socializing, and to find alternatives, such as going to the gym, walking, or having coffee dates at home. Lessons have been learned, and moving forward is actually looking pretty good. Setbacks are inevitable, but how you react to them changes the results dramatically.