January 1 is coming quickly, so it’s time to think about how I’m going to save my sabbatical money. I was going to just throw it into my savings account, but I’m far too impulsive, and withdrawing money would be too easy. So I decided to open a tax-free savings account (TFSA). Withdrawals will be easy, but I would need to keep track of how much goes in, and how much comes out each year, because if I deposit too much, I will be taxed on it. Once it gets complicated like that, I’m much less likely to withdraw anything.
With a TFSA, I can deposit $5,500/year. In addition, I can deposit $5,000/year retroactively from 2009 to 2012 ($20,000 more!), and pay no tax on the interest. Ever. So the maximum I can put away over the next 4 years is $42,000. I would be really impressed with myself if I can put that much away! Can you imagine how much fun I could have with that?
Remember, starting January 1, 2014, I will be taking a 20% pay cut. Being able to save on top of living with a pay cut, will be difficult (but not impossible!). The purpose of the pay cut is to allow my employer to put the money away for me, and by doing so, the pay cheques will keep coming in while I take a year off work.
I applied for the TFSA through my bank the other day. Once the paperwork comes in and I sign it (in order for the bank to register the account with Revenue Canada), I will be ready to start saving. I chose my current bank so it will be easy for me to transfer money in every now and then.
I think the first thing I will do once the account is set up, is deposit the jar of change I’ve been collecting. I have no idea how much is in there, but it weighs 6 pounds!
What about my regular savings account? That will be used for an emergency fund. Being on a tight budget is not realistic unless you plan for those unexpected and non-routine expenses.
And what about travel over the next four years? Well, I definitely have to cut back. No more globe-trotting 3 times a year. I will not however, give up travel during the upcoming “lean years”. After all, my love of travel is what’s driving all this. I will need to be much more frugal when it comes to travel, and keep finding ways to add to my air miles account. I plan to go back to Greece in June, 2014. Will I go anywhere before that? I REALLY want to. But I may just have to suck it up and stay home.Share This: