Canadian Personal Finance Blog

So one of the tricks financial planners like to pull out of their hats (in Canada at least), if you are going to receive a refund, you use a short term LOAN to buy more RRSPs and thus MAX out your RRSP.

Example:
If I was going to get a refund of $1200 (yeh right), if I took out a loan for $1560.00 I could max out my RRSPs. This assumes I am taxed at a rate of 30%, and that I pay off the loan right away (and I have $1560.00 in RRSP room as well). You don’t understand still? Let’s do the math:

• I would be getting $1200, so I could simply get a loan for $1200 and buy RRSPs with that, BUT I would then get a $1560 refund, because of the extra RRSPs that I bought
• Remember if you buy $1200 worth of RRSPs, your marginal rate is 30%, you would get $360 back for buying the RRSPs.
• So, I should take a loan for $1560 or so, and I will get more than $1560 in refund back (not much more, but a little), which I can then PAY OFF THE LOAN (this is REALLY important guys, don’t leave the loan hanging around). This means you now have more money in your RRSPs! Cool eh?

The important things to remember is, if you were planning on using your refund to pay down your mortgage or some other debt, that is good too, don’t get convinced that the only good idea is to get a loan to max out your RRSPs! Pay off the darn loan if you get it as well! DON’T BORROW THE MONEY FROM YOUR CREDIT CARD (can I be more exact, don’t do it).

It’s an idea, but not the ONLY good idea at RRSP time –C8j

Don’t just give up, because you have had a set back on your debt killing plans, or your financial road to success. Mistakes happen, learn from them, note them, understand why they happened and then get back on track, don’t just give up. We are all human (I hope) and with that we are flawed and make mistakes (some of us more than others), but if we simply give up each time we make a mistake we are doomed to live a boring and failure filled life.

Persistence does pay off, sometimes it feels like the ocean against the rocks, but even the ocean eventually wins!

I like this story, I have heard a few different versions, but it is a good story. Remember to keep on your Financial Plan, and don’t worry if you stumble, get up and keep going. After all if you stopped after the first time you fell when you were younger, you’d never walk now.

Giving Up Too Soon(Author Unknown)

A man meets a guru in the road. The man asks the guru, “which way is success?”

The berobed, bearded sage speaks not but points to a place off in the distance.

The man, thrilled by the prospect of quick and easy success, rushes off in the appropriate direction. Suddenly, there comes a loud “SPLAT.” Eventually, the man limps back, tattered and stunned, assuming he must have misinterpreted the message. He repeats his question to the guru, who again points silently in the same direction.

The man obediently walks off once more. This time the splat is deafening, and when the man crawls back, he is bloody, broken, tattered, and irate. “I asked you which way is success,” he screams at the guru. “I followed the direction you indicated. And all I got was splatted! No more of this pointing! Talk!”

Only then does the guru speak, and what he says is this: “Success IS that way. Just a little PAST splat.”

Hope your success isn’t just past SPLAT, but stay persistent

Right now in Ottawa every financial institution is advertising about how you should make sure that your RRSPs are max’ed out and how they are the right folks to talk to about them. I don’t really have any problems with these institutions, although anything done in haste I always worry about the consequences (i.e. make sure the money you are using for your RRSP contributions might not better be used to take on your debt load).

I guess the bigger question I have is, which is better to invest in (and this one is not an easy cut and dry question, because it involves future intangibles):

1. First, this is not a question it is a comment. If you have max’ed out your RRSP contributions, have little or no debt and are putting money away for your kids education (i.e. RESP) good for you! And do you want to adopt my kids or me?
2. If you have not max’ed out your RRSP, and you have debt load, and you have kids who will be going to a post-secondary institution, where do you put your money? This is the position I am in right now.
1. I have a mortgage
2. I have four kids
3. I have some RRSP room still (not a lot, but some)
3. The big question I guess would be do you max out your RRSP, or do you pay down your debt?

Lots of sites have discussed how it is important to do BOTH, I think I am of different minds on this.

If I pay my debt down, I can put money away later, AND I am more insulated from the dangers of layoffs, or some other catastrophic life event. If I put money in an RRSP as well as pay debt, I have money put away for a “rainy day” but I still have debt. Which is better? Not sure really, BUT MAKE A PLAN, is my only advice, and STICK TO IT!!! –C8j

The Lord Jesus Christ said, “Come to me, all you who are weary and burdened, and I will give you rest.” Matthew 11:28

So I learned a while back about the importance of rest, in all it’s forms. I was working far too long hours,worried about money, and not worrying much about my spirit or myself. I was sitting on the couch feeling burnt watching TV when suddenly my eyesight became a little blurry, then it seemed like a “ball” was lifting my field of vision, causing a bulge in the middle of it (if you have seen computer graphics, or screen savers that do this, you’ll kind of understand what I was seeing). I freaked out, what the heck was going on? My eyesight continued to be distorted for about an hour, and it finally went away. I talked to my optometrist and my doctor and they told me that I had an ocular migrane (I didn’t have any pain, just distortion). They asked me:

• Are you under stress?
• Are you drinking a lot of caffeine?
• Are you not getting enough sleep?

When I answered yes, and they saw the bags under my eyes, they told me this condition would reoccur, unless I relaxed and took time off. I managed to extricate myself from the stressful job, and cut down on the coffee, got some sleep, and made sure I got back into the life of my Church by working there and helping out.

Rest, you can’t worry about money all the time, sometimes you have to give yourself a break. –C8j