RRSP’s – What are they & Are they good or bad? Part 4

So let’s now breakdown some of the Goods and Bads of RRSPs, starting with the Goods:

Good facts about RRSPs:

1.    Tax Deduction in the year you contribute

2.    Long Term Growth of Investments

3.    Deferred tax on Growth of Investments

4.    Forced Savings program

Bad facts about RRSPs:

1.    You are eventually taxed

2.    There is a limit on how much you can contribute (may be a good)

3.    Unlike other investment vehicles, you cannot use RRSPs as collateral

4.    You are restricted as to what you can invest in

5.    There are age and income restrictions to RRSPs

6.    Government is in control of the rules

7.    RRSPs are in trust for the government

8.    You cannot receive the tax favorable benefits of Capital Gains and Dividend Income inside of an RRSP

9.    You cannot deduct investment losses on your taxes

10. You cannot deduct interest and carrying charges if you borrow money to invest in an RRSP

This gives you an idea of some of the main Goods and Bads of using RRSPs.  Your bottom line is that you need to plan thoroughly to decide if using RRSPs is for you or not!  Again remember the key if you are using RRSPs is to contribute when your income is high and withdraw when your income is low.

If you are contributing to RRSPs definitely consider using a self directed RRSP as there are many advantages.  Also if you are considering withdrawing from your RRSP, do it in increments of $5,000 or less as the withholding tax is lower.  The key in withdrawing an RRSP is to have a tax plan.  Kustom Design can help you plan a tax effective RRSP withdrawl if this is what you are looking at doing.
There are many more strategies available with and without RRSPs so do come plan with Kustom Design to ensure you maximize your potential and minimize your tax.  Some of the other things you can look at is using your RRSP to give yourself a “Self Directed Mortgage”, where your RRSP holds your mortgage!  Other strategies could be tax shelters and flow through shares.  Come take our Financial Boot Camp to learn more about all of these topics and more.  You can sign up for the Financial Boot Camp on our website at www.kustomdesign.ca/.

Why you need a Closed Circle, Part 2

As discussed in my other blogs on the Closed Circle Budget, when creating and managing a Closed Circle we should break down our spending into Obligations, Necessities and Wants.  Obligations are items that you are obligated to each month, Necessities are things that are needs but are not obligated to, and wants are your material wants.  For more on creating a Closed Circle in more detail, please see my other blogs.

One of the main reasons we create a Closed Circle is so we can have regular overflow in our life.  Overflow is the abundance of finances that come in above and beyond your closed circle.  Once you have answered the question as to “How Much is Enough?” you can then decide where overflow will go.  Overflow can be used for many different things. Overflow can be used for Accumulating Wealth and Creating Passive Cash Flow (investing).  It can be used to pay debt faster, give more or to help you achiever other goals that you and/or your family may have.

Let’s face it. The majority of people in the world are not operating on good financial principles.  2 of the main superpowers in the world, the United States and Europe are both in great financial trouble!  Do you think any of their financial troubles could have something to do with the way they spend?  Don’t get yourself into financial trouble and become a slave to debt, instead take control of your finances with a Closed Circle!  To learn more about the Closed Circle, read more of our blogs, contact us, and come attend one of our Financial Boot Camps!

Kustom Design finds success within Financial Boot Camp’s first week

News Release September 17, 2010 For Immediate Release Kustom Design finds success within Financial Boot Camp’s first week Fostering economic control, Kustom Design continues forward into week two of the Financial Boot Camp Calgary, Alberta (September 17, 2010) – The Kustom Design Group of Companies has studied the biblical principles of finance, and successfully identified the effective financial strategies essential for building lasting wealth. Findings from these strategies have helped Kustom Design adopt helpful financial services to provide to its boot camp members, generating the first week of camp a success. The Financial Boot Camp's second week will broaden last week’s session, and will attempt to examine how to eliminate bad debt through devising a game plan that will use the power of education and introduce cash flow. As well, Kustom Design will discuss top credit myths and provide tools for credit repair. With expert financial assistance, Kustom Design’s Financial Boot Camp members can expect to calculate payments, determine interest rates and solve for the present or future value of a loan or annuity. For more information providing about Kustom Design’s products and services, visit online at http://www.kustomdesign.ca. About Kustom Design Group Kustom Design Group consists of interconnected companies that offer a complete line of products and services in accounting, finance and tax. These services range from consulting and strategic planning to financial and tax education, helping clients save money on taxes, properly manage finances and attain financial freedom and lasting wealth. ###

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In response to Europe's Financial Troubles, Part 2

The EFSF will be fully operational June 2010, however they are awaiting each country to finish their respective parliamentary procedures. The EFSF will be a limited liability company, operating under Luxembourg law, that will be run by a board of directors appointed by euro zone members, the same people who prepare euro zone finance ministers' meetings. The EFSF will work hand in hand with the IMF, however the company will not need to ask for permission from euro zone national parliaments each time it wants to operate so they will maintain control over the funding alongside of the finance ministers. Once the EFSF raises money through the bond issue, it would lend money to the euro zone country in trouble charging higher interest. They are anticipating Triple A credit rating of the EFSF bonds as the euro zone countries have agreed to guarantee 120 percent of the value of the bonds on top of a cash reserve for the operation of the EFSF.

How is it possible that countries in financial trouble can put a 120 percent guarantee on bonds and make them triple A? It is also stated that it will not cost the euro zone countries anything, how is that possible. The countries are incurring more debt, and debt always costs! Notice that when someone wants to produce currency out of thin air, typically a Special Purpose Vehicle is set up. Most people don’t even understand the concept of a Special Purpose Vehicle. We do teach on this in the Financial Boot Camp. It seems that each time we get in more debt, the way to get out of the financial predicament is to incur more debt! The elastic band can only stretch so far, and similarly you can only put so much air into a balloon before it bursts!