{"id":271,"date":"2014-01-23T10:46:31","date_gmt":"2014-01-23T18:46:31","guid":{"rendered":"https:\/\/mgfadvisory.ca\/news\/?p=271"},"modified":"2018-08-23T10:46:56","modified_gmt":"2018-08-23T17:46:56","slug":"rrsp-vs-debt","status":"publish","type":"post","link":"https:\/\/mgfadvisory.ca\/news\/2014\/01\/23\/rrsp-vs-debt\/","title":{"rendered":"RRSP vs. Debt"},"content":{"rendered":"
\"RRSP<\/div>\n
\n

 <\/p>\n

As we enter the New Year many of us spend some time to reassess our financial goals and priorities.\u00a0\u00a0 The annual RRSP season affords us an opportunity to debate two priorities:\u00a0 the RRSP vs. Debt decision.\u00a0\u00a0 But is it a debate this year?\u00a0 I believe the pro RRSP will win significantly.\u00a0 I fear that those with a repayment of mortgage or personal debt priority will believe so as well.<\/p>\n

We have just watched security markets produce wonderful returns for the year just ended (CBC News Article Dec 31, 2013<\/a>), and in fact for the past several years since the financial crisis. \u00a0An investment in markets offering 9% and 26% returns would of handsomely reward you for the investment risk, no?<\/p>\n

And we currently live in a time of historically low interest rates.\u00a0 This fuels additional consumption, typically on borrowed funds, without current concern for the cost of this debt. \u00a0Consumer debt was up 21% during 2013, with only 24% of Canadians reporting themselves as being debt-free (CBC News Article Oct 29, 2013<\/a>).<\/p>\n

And how many households carry home mortgages?\u00a0 Most.\u00a0 And how many of those mortgages are Home Equity Line of Credits, which do not require principle payments? Many I suspect?\u00a0\u00a0 An how many people with mortgages are making additional payments to rid themselves of their mortgage quicker?\u00a0 I suspect not many.<\/p>\n

When we weigh our financial priorities, we can get trapped into looking at the short-term opportunities.\u00a0 Why pay down my 3.5% mortgage when I can invest and make 9% in 2013?\u00a0 If that were a fact that you could make 9%, then I agree.\u00a0 But any return beyond your basic deposit at the bank is not guaranteed and carries various degrees of investment risk.\u00a0\u00a0 At this point I like to remind readers how banks make their money:\u00a0 they lend to you at a higher rate than they offer you on your deposits.\u00a0 If you want a higher rate of return than what bank deposits, you are taking on investment risk.<\/p>\n

Do you want a 9% return?\u00a0 Yes.\u00a0 Do you want a 9% return if it means you could lose 15%?\u00a0 ???.<\/p>\n

Many people with mortgages and debt can afford to take on investment risk.\u00a0 But these are limited to people where the cash flow required to pay their mortgage is not a substantial drag on their disposable income. These are people that if borrowing rates were to increase by 1-2%, their cash flow continues to be strong and can persevere through the interest rate changes without the need to abandon other financial priorities.\u00a0 Notice my focus here is on cash flows, and not current interest rates and stock market returns.<\/p>\n

If your cash flow can\u2019t handle the investment risk, either currently or in the future \u2013 you have one priority:\u00a0 Repay your Debt!! \u00a0\u00a0Stick with it!!<\/p>\n

Contact me for a review of your current debt strategies and RRSP investment needs at\u00a0marco@mgfadvisory.ca<\/a>\u00a0or\u00a0604-789-3888<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"  As we enter the New Year many of us spend some time to reassess our financial goals and priorities.\u00a0\u00a0 The annual RRSP season affords us an opportunity to debate two priorities:\u00a0 the RRSP vs. Debt decision.\u00a0\u00a0 But is it a debate this year?\u00a0 I believe the pro RRSP will win significantly.\u00a0 I fear that…

View Article<\/a><\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-271","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/posts\/271","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/comments?post=271"}],"version-history":[{"count":0,"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/posts\/271\/revisions"}],"wp:attachment":[{"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/media?parent=271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/categories?post=271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mgfadvisory.ca\/news\/wp-json\/wp\/v2\/tags?post=271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}