Happy RRSP Deadline

So here we are just a few days from this years’ RRSP deadline. It’s the one time in the year when the no-service banks stay open forever in order to get our business. But most of us are still scrambling.

On average, our RRSP contribution is about $2,600. If we think about that, it’s a pretty puny amount to invest in ourselves and for our retirement, isn’t it. Sure, there are maybe 20 percent or so who max out. But for the rest of us it really doesn’t matter what the max is – we tend to think of what the minimum is, instead.

But why? It can’t be because we’re just really happy to pay a whole bunch of extra income tax! No, it’s because we don’t have the money! Yet the fundamental way rich people become rich is by paying themselves first. It really is that simple – yet also very hard.

Will bills and all those monthly payments, we are constantly paying for yesterday instead of investing in tomorrow. No that sounds simple, but it really isn’t. When all of our money goes to pay for yesterday’s stuff, there’s just nothing left over. It’s not like we can skip the car payments, not pay our credit cards or the mortgage for a while.

The trick, OK, it’s not really a trick, is to turn this ship around. When we don’t have all those payments, we have the money left over to invest proactively.

If you’re buried in debt and payments, I would never recommend figuring out how to save for an RRSP at the same time. You are way better off taking that money for a year or so and focusing every ounce of energy and every dollar you have to becoming debt free. I’m not saying never put money into your retirement savings but for a year or so you’ll have a way bigger return when you pay off your debts.

If you have a $400 car payment and are putting $200 into an RRSP, you’re trying to do too many things at once. If the car is paid off, you’ll then have the whole $600 for your retirement savings and you’ll catch up way quicker and will have done it much smarter.

For someone who will do an RRSP, just make sure you take the tax return and either use it to pay off some debt or stick it right back into a 2009 RRSP. THAT is how you get ahead.

For someone who is going to get an RRSP loan, consider making it a little smaller this year and also instructing your investment advisor to automatically take some money out of your chequing account for this coming year. In that way, at the end of 2009 you’ll be ahead because you’ll already have the money saved!

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