Tag Archives: RRSP loans

Money & Dating Plus First Time Home Buyer Plans

Spending and Dating

OK, since I’m single I have to keep up on these kinds of surveys. This one is from match.com and surveyed a ton of singles on their opinions on spending and dating. It turns out that men and women have very different expectations:

Men are three times more likely to consider the cost of a date.
On the other hand, 58% of women prefer a casual date, and not one that involves spending a lot of money.
While I’m guessing it’s not a big consideration for men, 53% of women do spend money before the date on things such as a new outfit, manicure, or stylist. I hope the date is worth that money! Or maybe it shouldn’t be called spending – maybe it should be called an investment…

For both sexes, 82% of respondents say their interest in the other person increases if they see an act of financial generosity. That could be many things ranging from a larger tip, or some kind of charitable giving.

On the downside, three-quarters of both sexes are turned off if they find out that their date has more than $5,000 of credit card debt.

First time home buyers:

With the requirement of a 5% down payment, and pretty high average home prices, it keeps getting harder and harder for someone to get into their first home.

I read some interesting stats the other day on using the RRSP Home Buyers’ Plan: Since inception in 1992, almost 2.5 million people have taken advantage of the program, with an average withdrawal from their RRSP of just under $11,000. In total, over $26 billion has been withdrawn from the program.

Over the past five years, the numbers and average withdrawal have both decreased. It may be a good idea to sort of borrow from yourself, but you have to remember that it’s money that is now NOT growing in your RRSP for retirement and you DO have to pay it back over the next 15 years. If you don’t, one-fifteenth of the total is added to your income that year, and you’ll be paying taxes on it. You also need to remember that this payback in on top of your new mortgage payment, utilities, property taxes, etc. Those are all likely to be a much larger part of your income now.

Who cares? Well, most of us do – or should. Almost 70% of Canadians own their own home – well, have a lender who lets them live in the home. And almost 40% of our entire wealth is tied up in the equity of our homes.

If the US government were a family:

Here is an interesting way of taking the staggering U.S. debt of over $14 trillion and breaking it down to figures we can understand:

This family would earn $58,000 a year, and spend $75,000, and have $327,000 in credit card debt. The proposing so-called “huge” spending cuts would cut expenses from $75,000 to $72,000 a year.

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!