The Importance of Paying Attention to Financial Statements
This is a column by regular contributor Clark
I’ll relate my experience to underscore the significance of paying attention to your finances – not just the saving and investing parts but also the all-important records of those money transfers/contributions.
I contributed to my TFSA account for 2009 in May of that year and rested in content that I had been prudent in taking advantage of the newly introduced savings vehicle. Since financial institutions do not issue an official contribution receipt for TFSAs like they do for RRSPs, I viewed my monthly statement, verified that the contribution was listed and let it be.
Fast forward to Feb 2010: I filed my income tax return and the tax software (forms) did not have any line about TFSAs. I figured that financial institutions would report to the Canada Revenue Agency (CRA) directly and I had no further part to play. After receiving my Notice of Assessment (NoA) from the CRA, I found that the summary section listed that I had a TFSA contribution room of $10,000 for the year 2010 (the extra $5000 was carried over from the unused room for 2009!). The NoA mentioned that I need to contact my financial institution if there are any errors in the contribution room given on the summary. Despite seeing this, I waited for another couple of weeks thinking that financial institutions may have until April (the tax filing deadline) to report 2009 TFSA contributions. Call it laziness or naivety (or anything else that you find appropriate) but that is what I did!
Sometime in early April, a light bulb went off in my head and I realized that I have to take responsibility for my money. When I contacted my financial institution, they were surprised and said that all contributions had been reported – there went my generosity of giving financial institutions time until April to report TFSA contributions! They asked for a copy of my NoA as proof and promised to do the needful. I learned that my report had been rejected by the CRA the first time around due to some error in the data elements. A few weeks after my intervention, I checked the TFSA section of My Account on the CRA website to see that the contribution had been accepted and showed up correctly.
It is entirely possible that my case was an unusual one and someone from the financial institution may have noticed my rejected report in a few months and corrected the situation. As long as I did not contribute over $5000 for 2010, I would not have been penalized. Nonetheless, I’ll share a few lessons I learned from this experience – some new, some refreshers.
- Never Assume. It is possible that TFSA being a new savings vehicle, there were problems, since parties had to get used to the requirements. However, do not assume anything! Be it the time when institutions file their reports or the pace of processing. Contact someone, preferably your financial institution or the CRA.
- Watch your Money. Keep track of your monthly expenses and net worth, so that you know where you stand. Alternately, you could try one of the money management software tools – Quicken and Mint spring to mind.
- See Where you Stand. If one so desires, they could also get obsessed with net worth tracking and see where they stand among people in their age group, with similar education or years of experience, etc. by browsing profiles on NetWorthIQ.
- Be Diligent. Please check your statements when they arrive – bank, discount broker, credit card, mortgage, utility bills, etc. If there is an error, contact the necessary institution as soon as possible. Unless there is a strong reason not to, sign up for the electronic version of your bills and statements, so that you can save them on your computer, back them up easily and preserve some trees along the way.
- Be Patient. Once-in-a-while, you might create a fuss over nothing (if it was just slow pace of processing) but most times, it will be worth the effort.
- Care about your Finances. No one cares more about your money than you – not even your financial advisor; if he does, then you have a problem, since you’ve become a mere supplier of funds without any knowledge about how (and if) that capital is creating more for you (hopefully, it is!).
Have you had a similar experience? Did you respond swiftly to rectify the error? Or make assumptions like me that the problem will fix itself?
About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism