Financial planning starts with paying yourself regularly

I was working at my desk the other day with the radio on and my jaw almost hit my sewing machine. The interviewer was talking with a financial expert about RRSPs and Tax Free Savings Accounts. The shocker for me was that the TFSAs were introduced in 2009 but it seems like it was yesterday. With the maximum contribution per year at $5,000, your TFSA could be sitting at $15,000 right now. And that's without any financial gains in the interim. The expert quoted one of her clients who had chosen rather well with some stocks and had a current balance of $45,000 in his TFSA. No capital gains on that baby either.

That 3 minute radio interview got me looking pretty closely at my own financial planning and more specifically at my TFSA. Suffice to say it's a far cry from $15,000 but a more honest admission would be that I have put very little effort into taking advantage of the TFSAs. It's been months and months since I've made a contribution.

The thing about the TFSAs is you can hold anything in there. Cash, stocks, bonds, mutual funds, treasury bills, guaranteed investment certificates, you name it. And those investments will grow tax free. Your annual contribution is capped at $5,000 per year so you could open 5 TFSAs at 5 different banks and put $1,000 in each if you wanted but since this would limit your buying power, it doesn't seem like a smart idea.

The thing about saving money is that a lot is better than a little and a little is better than nothing. This last part I'd forgotten. I always have a little but somehow it wouldn't feel worthwhile to actually put that little away someplace separate. That's going to change starting this month.

So as a stranger in your computer and someone you can delete or shut down or Unlike, let me risk asking you some politically incorrect questions about your own financial savings:

• if you're in Canada, have you opened a Tax Free Savings Account for yourself? If not, I urge you to talk to your bank this week and tell them to get the forms ready for you. Tell them you want a trading account. Better to be set up at the beginning in case you want to purchase mutual funds or ishares down the road.
• do you invoice yourself each month? I don't but I'm going to start. It might only be $50 but as I say, a little is better than nothing and nothing is what I'm doing now. Billing yourself a certain amount each month is extremely effective. Yes it's another bill and yes you're going to pay it. It's not optional. Treat it like your phone bill or your internet. It has to be paid to keep you and everyone else in the house happy. 
• are your savings off limits? If you do have some egg money, do you view it truly as savings for your future or do you view it as funds you can access when there's an extra expense? Savings for yourself should be completely and entirely off limits to you and everyone else. No dipping. No withdrawing. When you're 70, you'll be grateful for your vigilence.

The best time to plant a tree is 20 years ago. The second best time to plant a tree is today. Maintaining financial independence as we age is surely what all of us desire and the smart ones among us likely started years ago. But the rest of us will start today.