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2008 RRSP Deadline

ImageThe RRSP deadline is midnight tonight, Friday, Feb. 29, 2008.

Financial institutions across the country will be staying open late to deal with the procrastinators who wait until the very last day to make their RRSP contribution before the midnight deadline. And if they don't make it into their bank branch or financial adviser's office in time, they can always try making their contribution through the internet.

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There is a lot of strategic thinking going on around this time. RRSP loan rates are usually very low. You have to work out "If I borrow X, and contribute to my RRSP, I will get Y back, which I can use to pay down the RRSP loan."

The funny thing is that most investors make a beeline to their bank branch or financial institution, when they should be talking to their tax advisor/preparer. To decide on what to invest in, it makes sense. But when you want to work out how much to invest, you are better to talk to your tax advisor/preparer.

Your tax advisor/preparer knows how much room you have and can work out strategies for borrowing, and paying back that make the most financial sense for you. They are also aware of your other income and expenses from preparing your previous year's tax returns. Often this is more important in the short term than deciding on what to invest in. By the way, lots of people just park their money in a 'safe' money market fund, until they decide what to invest in.

ImageAlso, bear in mind that most banks and financial advisors are in the business of selling their line of mutual funds. This leads to a conflict of interest situation. You may be amused to find that whatever your needs are, they always prescribe their products. It seems a little suspicious to me, how they quicky try to steer you to buying mutual funds, when recently almost all mutual funds lose money. They make money on the transactions, so they win every time. Here is a test - ask your financial advisor for some help in preparing a budget, and see what you get.

Your tax advisor/preparer has no conflict of interest, since they do not sell investments. They can advise you without prejudice, based on what is best for you.

Pat

P.S. This next item is a joke I found. I hope you enjoy it:

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