Good evening as the title reads RRSP season is here or at least that is what all the online ads, and other marketing avenues are saying. Truth is RRSP season is always here 365 days a year. If this is an avenue you choose to set aside money for retirement good it is a step in the right direction. Why is it that a lot of us wait to the deadline of every year to put into it and the onslaught of marketing reminders to do so?
Is it psychological in that it is attached somewhat to dealing with taxes and that is not typically one of people’s favorite or happiest things to do on a yearly basis? Is it not wanting to let go of that money or so it feels until the last minute in case there is that item that pops up we “want” not necessarily need but want. Could it be just one of those “chores” we put on the back burner until prompted to do something about it?
Whatever the reason is I hope to give another perspective on how the RRSP can be viewed and utilized as a great wealth accumulation vehicle and one that should be driven daily if possible. For starters if you do find you have money at panic time every year to put into an RRSP, then odds are throughout the year all along you have funds that can go in there. There are many benefits to putting funds in there as you come across them. 1) Once you put it in it is somewhat out of sight and out of mind and can’t be spent on a want. 2) You can put it to work that much sooner for you earning yourself more money in whatever form of investment you put it in ETF, Stocks, etc. the more time it is invested the better the effects of compounding will be. 3) By putting in as you come across excess funds, you might find yourself year to year putting away more thus increasing your tax return possibly as well as growing your nest egg all the quicker. 4)
Last but not least is what do you do with the tax return if your getting one with the funds you have put into the RRSP? First and foremeost use it to pay down any RRSP catch up loans if you have used them to maximize your RRSP contributions for the year start getting that interest it will be accruing paid down, and then any excess funds use to pay off the RRSP loan first. Once this has been accomplished then start putting the excess funds back into your RRSP. This method can basically be treated like your shampoo routine rinse repeat as necessary.
Another thing that commonly happens with the tax return is it gets spent on wants or “toys”, I strongly caution that this be thought through very carefully on whether it truly is needed and instead take that money and use it to get a head start on the next year’s RRSP contributions or roll it into a TFSA account. Then that money can begin to work for you as well. The idea here is get as many “money seeds” as you can growing for you and before you know it you have a field full of money plants. Upon which will start generating their own money and it becomes a snowball effect getting bigger and bigger the longer it is allowed to work for you.
I hope this helps to create what becomes a routine for anyone to use this example of one of a few tools we have available to us to create wealth.
Goodnight and happy tax season from GWF 🙂