Every year I have clients who, in the closing days of the RSP deadline, call me to make a large contribution. This year they were related to me and it was 4:30 on March 1st. THAT is leaving it to the last second.
A lot of the time, these last-minute clients either require an RSP loan or use a line of credit to source their contributions. I don’t even know how many people want to make a large contribution to reduce their taxes but just can’t because they don’t have access to that much at one time.
So then Ken, how can we fix that? With math and psychology.
Let’s say you wanted to make a $4,000 RSP contribution for the last tax season but couldn’t find the money. This year, instead of waiting, start contributing now. Each pay period, take a portion of your income and immediately contribute to your RSP. 2 things will happen: 1) After a few months, you won’t even notice that money as your cash flow has adapted, and b) you take advantage of market fluctuations.
Now, when you do your taxes next year and realize that a $4,000 RSP contribution would help you out a lot, you have already contributed a good portion of that already.
You can’t argue with math.
Kenneth Coombs CFP CHS RRC
Ken has worked in the financial services industry since 2005, is a Registered Retirement Consultant, and is a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.