After speaking to my mother, and consulting my handy dandy copy of Wealthy Barber (Uhmm….Maren? I still have your copy if you’re looking for it…) I’ve realized that there are WAY too many options to what I should be doing with my money.
Do you all feel this way, particularly around the crunch time which is RSP season? Or as I like to call it…the ARRRRR(matey)SP season?
Here’s a simple dilemma – Do I take my refund of…let’s say $1,000 and pay off some debt that is accumulating interest, or do I maximize my RRSP contributions by borrowing $1,500 and slapping it all into an RRSP so then I get no cash in hand, but a whole lot in the RRSP.
The Wealthy Barber looks at how it’s smarter to put money into an RRSP NOW rather than later as cumulative interest is your friend. If I wait a year, I’ve probably wasted tons of money. So there’s the pro on that scale. The message: Put into an RRSP now!
However, you have to admit that the more immediate urgency of paying off immediate debt looks pretty tempting also. The message: Get rid of that crawling interest! Live a debt free (well, almost debt free for those who are paying friendship tax to my parents for allowing me to be your friend) life!
Let’s also swing over to another thought process which I never really took much interest in until yesterday while talking to Mom – paying down the principle (principal?) on your mortgage.
If you have mortgage, you have to admit that it’s probably the largest pot of money you ever will borrow and the interest is sky-high when you think about it. The rates are not, but the interest you are paying is. Uh, when I say the interest rate is not high, I am talking to the people outside of the early 80s.
So, common sense would dictate that if you have a chance to put money down on your principle, you should! Everyone’s mortgage is different – mine indicates that I am allowed to put money down on the principle as long as it doesn’t break 20% annually. I don’t think there is any fear in reaching 20% of my mortgage anytime soon!
It would be interesting to try and figure out which is better:
A) Putting ‘x’ amount of dollars into an RRSP with…let’s say 10% interest.
Or
B) Putting the same ‘x amount of dollars onto the principle of your mortgage which is at 4%.
Man, I need a financial guru to crunch those numbers. Off the top of my head, I would assume it’s better to put the cash into the RRSP because it has the higher interest. But it doesn’t take into account the sheer vastness of interest being generated by the interest.
So, the question I pose to all of you is this – what’s your favourite money saving tip that you adhere to? I am going to bank my bet on RSPs as they are shoved down our throat every year. That’s not a bad thing, but has anyone favoured alternative methods to saving, like paying down your mortgage? Is it the better route?
Let’s talk about the almighty dollar here.
By the way, the new Nine Inch Nails DVD – Beside You In Time is out today. Pick it up. Matt and I went to see the With Teeth tour a few years back in Montreal and it blew my mind. Literally. I have a bump now in behind my head.