Putting money into RRSPs and paying extra on your mortgage will not make you rich
Have you ever wondered if you’re on the right path?
In my professional travels, I participate in conferences and conventions all over North America and over the past several years, I traveled to Chicago.
As anyone who has traveled to Chicago knows, O’Hare Airport is one of the busiest airports in the world and can be confusing.
On the first few trips, I would grab my luggage and walk outside to be picked up at the bus shuttle center. I would follow the crowd from the baggage claim area outside to the ground transportation area, then across eight lanes of traffic to the shuttle center, often in freezing, windy conditions, without a coat.
One blustery cold, wet day, I followed the crowd and arrived at the shuttle center with my hair windblown and my suit sopping wet. To my surprise, I met the gentleman who had sat next to me
on my flight.
His hair was in place and his suit was dry. I said, “How did you get here before me and in such great shape?” He replied, “Oh, didn’t you know there’s an easier way to get here? And you stay warm and dry!” He told me about a corridor that leads people safely underground to the shuttle center, sheltered from traffic and unpleasant weather.
The next time I flew into O’Hare, I learned that the path leading to the shuttle center had always been there – I just hadn’t noticed it.
Now it’s up to me each trip to choose the path I’m going to take: the way the crowd goes or the safer, more sheltered route.
One day I asked the hotel shuttle service why they didn’t instruct people on how to reach the shuttle center by the safer, protected route. They said, “Oh, it’s too hard to get people to understand, so we just tell them to follow the crowd.”
The ideas you will be presented with are not novel however, the approaches are.
With the insights you are about to gain, I hope you will choose not to always follow the crowd (and accepted wisdom), but to find the best path for your journey towards financial independence.
For the first step on that journey, let’s take a look at the two places most Canadians accumulate the most money: our homes and our RRSPs – generally in that order.
Following accepted wisdom, we put money into our RRSPs for retirement. We do this because our contributions are tax deductible and the growth of our RRSPs grow tax deferred. (I didn’t say “tax free” – I said, “tax deferred”. This is a distinction that gets lost on most individuals).
At the same time, Canadians assume (because we have been taught) that it’s best to achieve the goal of financial security with outright home ownership. So, to save mortgage interest expense
we begin sending extra principal payments to the bank.
However, like naïve, inexperienced drivers, this is just like driving down the highway of life, pursuing financial security with one foot on the brake pedal and the other foot on the gas.
Now we may eventually make it to our destination, but only after a pretty jerky ride. Furthermore, we may wonder why a few others arrived at the station of financial independence sooner, achieving more, with a much smoother ride!
“But I am doing everything right!”
Suddenly we realize that during all of those years of earning money, we socked a portion away in tax sheltered investments (our RRSPs) that gave us a tax deduction on the front end, just to be hammered with taxes on the back end.
At the same time, we were making extra mortgage payments we were committing those extra dollars into an investment (our homes) where the money was making us a 0% return.
During our “golden years” of retirement, we painfully come to the realization that we increased our tax liability by postponing it to a time when we no longer had significant deductions.
In frustration, we complain, “But I did everything right!
Everyone concerned about their retirement puts money into RRSPs, and I’ve always been taught that you should pay off your mortgage as soon as possible by sending extra principal payments to the bank!”
There is a valuable lesson here: All the dogs barking up the wrong tree doesn’t make it the right one!
If what you thought to be the best way to save for retirement or to pay off your mortgage turned out not to be the best way, when would you want to know?
Now is the time to discover the best way to safely accumulate more money. The sooner you empower yourself with the knowledge to attain financial independence, the greater your net worth will become.
My goal is to create a meaningful transformation in your life through the concepts, truths, and strategies I am about to share with you.
Most educational experiences are information-based.
However, on the other hand, I will provide an insights-based experience for you – based on my personal beliefs and observations gathered from over 22 years in the financial services industry.
When a person experiences personal epiphanies, he or she is motivated to change. As you continue to read, it is my sincere desire that a meaningful transformation will take place as you learn to give new life to your personal and financial assets.
Welcome to the “the path less traveled!”
About The Author
Mark Huber is a is a full time certified financial planner (CFP).
Mark has distilled 22 years of insights and experience in the financial services industry into “The UnCanadian Way” series of eBooks, audios and videos.
For the latest: “How To Get Rid Of Your Mortgage – The UnCanadian Way”
2008 Mark Huber
This article may be freely distributed if this resource box stays attached.
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