Deadlines are looming again (FYI if you didn’t know it is February 29, 2012) for your contribution to be counted towards the 2011 tax year.

I’m curious to know (you know, because I’m nosy like that), for those that contribute to an RRSP,  when do you contribute?

Do you contribute in a lump sum in early 2011?
Do you contribute throughout the year in 2011?
Or do you wait until the first two months of 2012 to put in that big chunk of change in?

What I do (and there’s no rhyme or reason or method to my madness) is I contribute a set amount per month and then if I have room left over, I’ll contribute a lump sum to max out my RRSP afterwards.  After I finish paying back my Home Buyer’s Plan, I’ll likely stop contributing to my RRSP’s (unless I have oodles and oodles of money after contributing to my TFSA already) since I plan to have a defined benefit pension plan.  However, who knows, I might be desperate to decrease my taxes in which case I’ll probably contribute to an RRSP as well.

Speaking of RRSP’s, I had the lovely opportunity to talk to Bryan Borzykowski from Moneysense.ca (I idolize Money Sense so it was pretty awesome to be mentioned in it) and he interviewed me about my strategy for my RRSP’s.

Here are some RRSP posts that might pique your interest  in case you’re not sick of seeing RRSP stuff just yet.

• RRSP versus TFSA: Head to Head Comparison
• RRSP’s Holdings Part 1
• RRSP Holdings Part 2: What to Keep in and Out of your RRSP (I loved writing this post but no one commented on it, sadly.  I wrote it when my blog was a baby in blog years)

Have a fantabulous weekend!

Pf Blog Love

• This blog has been featured in the Jenny Pincher’s Blog Carnival (woohoo!)
• My Own Advisor talked about the retirement goals of Gen X and Gen Y (and no one is thinking about being 67)
• Free Money Wisdom got engaged and WON their honeymoon (that is so awesome!!)
• Million Dollar Journey my blogging idol posts his net worth updates- he’s killing it and I know he’ll make his goal
• Dividend Ninja also weighs in on the TFSA or RRSP debate
• The Financial Blogger asks you where are you… where do you stand?
• My University Money asks whether you feel more satisfied earning or saving (for me it’s both lol)
• Boomer and Echo talks about the hot Boomer topic, of the OAS age increase from 65 to 67
• It’s not too late! Crystal from Budgeting in the Fun Stuff shares her New Years Resolutions
• Financial Uproar ponders the question.. why are people scared to be rich?
• Financial Samurai asks those who are interested in quitting their jobs to blog full time to read this first

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$132, 262 (+ 2.4%)

Some of you might have noticed that I haven’t done a net worth update in a while.  At first, I decided to stop posting my updates because of all the negative comments I was receiving on my home purchase.  Then I decided to compromise, because really, a personal finance blog isn’t personal if I don’t share some detail with you all   As silly as it may sound to some of the readers that are bearish on real estate, I am planning to live in this home for 5-10 years (or maybe more, who knows) and did not primarily purchase it for investing reasons.  We just wanted a place to call our own.  The thought of this piece of land being “ours” really hit home when I decided to grab a shovel last weekend and dug up a garden in the back yard.  It was quite a surreal experience.

The renovations and everything are all done to the money pit house and now we’re in the process this month of finalizing everything and finding a tenant for downstairs.  We just have a few minor things to do before we can start taking pictures of the suite and getting it ready for Craigslist.

Okay, so here’s the breakdown for this quarter:

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In case you didn’t know, the T1213 (entitled “Request to Reduce Tax Deductions at Source for Tax Year”) is a form from the Canada Revenue Agency that lets you take back the interest free loan to the government you give them every time you get a huge honkin’ tax return.

If you regularly contribute to your RRSP’s and you also regularly donate in the form of a pre-authorized contribution plan (like I have for my TD e-series funds), you regularly donate to charities or pay for child care costs, you can choose to forgo the big tax return at the end of the year and just get a bigger pay cheque bi-weekly or monthly or whenever you get paid.

Most people would want to get a bigger pay cheque because otherwise you are giving an interest free loan to the government (the government already takes so much, why would we want to give them even more?).  If they give you a loan (e.g. if you over-contributed to your TFSA) they ding you like heck, but when they do it to us, they just turn their back.  Sigh… C’est la vie

If you are interested in getting less taxes dinged each pay cheque, here are the steps you need to take in order to do so:

Make sure you have a pre-authorized payment plan for your RRSP

• Make sure you have all the slips and receipts etc. for your child care costs or your charitable donations that you regularly make, employment expenses you would normally fill out on your T777, interest expenses on investment loans, and even rental losses.

• Find out who your human resources/ payroll deductible person at your place of work is, because you will have to give the CRA their contact information and and they can set it up through payroll to deduct less taxes of your paycheque

• Fill out that T1213 form and send it in along with the documentation and send it in to CRA

• Et voila, you will get less taxes taken off your paycheque in about a few week to months

The reasons why I’m not filling out the T1213:

I think this is a great way to get taxed less throughout the year, but to be honest (and feel free to judge me haha), I really enjoy my big tax refund at the end of the year.  I’m not sure why, perhaps it’s some sort of psychological defect of mine.  I like to plan how I spend the big tax refund and I like how I can use it to fill up my TFSA contribution room or to fill up my RRSP room for next year.  I know that if I got a bigger pay cheque throughout the year, despite my automatic ‘pay myself first’ deductions, I know I would be tempted to adjust things and adjust my budget, and I probably would contribute less to my TFSA and RRSPs (heck, it’s human nature, I suppose).

Another reason is because I’m afraid of commitment.  Although I have been contributing regularly to my pre-authorized payment plan for my RRSP for years, I like the idea of just stopping it if need be (or if life gets in the way of my regular contributions)… without having to fill out more paper work or talking to the human resources person again, or being on hold on the phone with the Canada Revenue Agency for eons.

Finally, because I get a lot of investment income slips, it can be unpredictable as to what my interest income is for the year, or my capital gains etc.  I don’t want to have to pay the Canada Revenue Agency for this and with the RRSP deduction, it would be a good buffer for all of this non-employment income I get, so I can avoid (God forbid) having to OWE the Canada Revenue Agency come tax time.

So my dear government, enjoy your interest free loan courtesy of me…for now.  I know I’m not being financial smart or prudent with this decision, but that’s what personal finance is about, right? It’s personal What works for me may not work for others.

Readers, do you use the T1213 form?  I wonder what the percentage of Canadians is that reduce their income taxes is, by this method?  Can you list any other pros or cons for the T1213 form completion?  Do you enjoy the big tax refund at the end of the year like me, or are you more pragmatic?

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$129172 (+ 1.03%)

Another month has gone by, we’re almost into 1/4 of 2011 already!  I hope everyone is keeping up with their personal finance resolutions.  I usually do my net worth calculation at the same time every month (yes, I actually look FORWARD to this, am I a personal finance geek or what?), but this month it was a little skewed as I was out of town (more on that later this week).  I think I might be a few days off from when I usually do my calculation.  I still haven’t got to including my pension back into the net worth calculations, though.

I also delayed posting this because I was hesitant to include so much information for the world to see.  I hope it benefits you in some way, you can try and learn from my mistakes (and victories, hopefully)…

Okay, so here’s the breakdown for February:

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There has been a lot of talk about which one is better, the RRSP or the TFSA in both the PF blogosphere and the media.  Both are great tools for saving for us Canadians.  Given that it’s a fresh year (and almost time the RRSP contribution deadline for 2011- March 1, in case you forgot), more people are thinking about the TFSA and the RRSP.

In an ideal world, one could max out both the RRSP and the TFSA.  That would be ideal. Though in the real world, life happens, and it is oftentimes very difficult to be able to scrounge up the money (without having to sell a kidney on the black market-kidding!) to be able to max out both the RRSP and the TFSA.

In my opinion, the RRSP and the TFSA are like siblings. Very different siblings. Almost mirror opposites and the inverse of each other. They both compete for your money and attention.  They are both good, but as we all know, one can be better for you than the other, just like parents really do have a preference of one sibling over the other, but they just don’t say it aloud (uh oh, is my middle child syndrome coming out in my post?!  Sorry about that).

So let’s talk about the RRSP first (the older sibling):

The Basic Lowdown on the RRSP:

• The RRSP was introduced in 1957 (yeah, it’s the really old sibling)
• As detailed in my RRSP post, the RRSP can hold a number of things (including GIC’s, stocks, mutual funds, bonds); it’s like a basket of investments sheltered from tax
• Contributing to the RRSP is with PRE-TAX income (the tax refund you get is your pre-tax money, but given to back to you at a later date)
• You will have to pay tax eventually when you take money out of it- it’s a tax deferral program (the hope is that when you take money OUT of the RRSP, you’ll be low income aka retired, so there won’t be as much income)
• You are supposed to contribute to it to reap the tax deductions when you’re at a higher tax bracket, and take it out when you are at a lower tax bracket.
• There are two options where you are allowed to borrow money from your own RRSP: 1) Home Buyers Plan and 2) Lifelong Learning Plan (with both you are expected to pay back 1/15 and 1/10 respectively, of the amount you borrowed per year until its fully paid)

The Lowdown on the TFSA:

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