So far, so good. Studying is going well. Not much to study considering I have only had two classes since the last test.
My Friday was an interesting one in that I just discovered some amazing financial knowledge.
As you may know, I took out some money from my RRSPs to purchase my house. Let’s say I took out $10,000 for the house. I would have 15 years to pay back that $10,000 in equal payments (aka, whatever is left over divided by 15).
I was under the assumption that I would have to pay back the $1000 before I could put anything into RRSPs that I could deduct from my taxes. So here I was thinking I would have to bust my ass to pay off the $10,000 so I could start back into contributing to my regular RRSPs.
Not so! Amelia filled me in on the secret that as long as I made the minimum payment every year, all the other cash I put into my RRSPs would be good to go!
This opened up a multitude of opportunities for me. Maren lent me The Wealthy Barber on Friday and I was done it by Saturday morning. That book opened up my eyes to A LOT of financial things that I didn’t think about. You should all go read it. It’s an easy read, 200 pages, and it will change your outlook on the future. I’m don’t think I went wrong in the finance area…I knew I was going to need some cash to buy a house and I did.
But now that I’m done that, I’m ready for the next step. Putting my cash into high interest accounts like mutual funds and whatnot.
The main message of The Wealthy Barber is to put your money in NOW. Not tomorrow, but now. Compound interest is your friend over time. Read the book.
Comments
7 responses to “Hey! You Turn Around…”
I picked up a copy of the Wealthy Barbor last year. It pretty much summed up the most important parts of my first year finance class (well, the personal finance stuff) in a pretty interesting way!
I started investing in RRSPs almost right away, because as you say, Compound Interest is Your Friend!!
So what’s the deal with the payback? If I take out $10,000 I will have to pay that back at a rate of about $55/month over 15 years. But assuming I pay $200 a month, that means that I can count $145 towards reducing my taxable income??
Does it automatically get spread over 15 years, almost to your beneft?
This is making me feel better.
You are correct.
Technically, you don’t have to pay back per month…it’s just a sum of money at the end of the year.
But in this specific case, let’s say that you do pay $55/month.
Then yes, the extra $145 a month can go to reduce your taxable income.
I never realized this all along. I thought that this $55/month (or heck…the $200 a month) would have to go to pay back the $10K. No sirree.
I feel better already.
ah, the old saying “it takes money to make money”
Palmer did you remember the tax credit for your first house?
What tax credit?
do tell!
the Ontario tax credit is for a new home, sucks!
Compound interest is NOT my friend (damn mortgage)