A brilliant plan from the government!!!!

Just for old time’s sake, I need to say something about finance…

Exciting isn’t it!!!!!!!

For those reading this page who have no idea why I say it’s for old time’s sake, before moving to Australia, I spent a number of years studying business and finance and working in the finance industry. Dealing with finances is something I enjoy, and keeping current on the subject not only interests me but has also been highly influential in me making thousands of dollars and saving thousands more.

And it’s on that note that I decided to write something. Even from across the world, I’m able to keep up with current news from my beloved homeland and I just recently read through some documents regarding the budget set out by the Canadian federal government this week. One thing in particular caught my attention and I had to find more information on it. What I read is really exciting because people who properly use this particular provision stand to save many thousands of dollars of income tax in their lifetime. I plan to be one of those people.

The new provision allows Canadian to set aside up to $5,000 per year into a special account in which they can purchase all the same investments they can currently purchase in an RRSP. Like an RRSP, there is to be no tax on growth in this account. Unlike the RRSP, there is no deduction for money put in, but also unlike the RRSP, there is no tax on the money taken out.

Over the years, it has bothered me that financial institutions, governments, and most of the general public has pushed RRSP’s as a great investment for every Canadian earning income. The fact is that for some people, RRSP’s are great options (if the right investments are chosen within the RRSP account) but for many of us, they really aren’t that great. In my case for example, I have had one year in my employment history when RRSP’s were a good option. In every other year, there were better investment options.

With the new provision, the options just got a whole lot better. Starting in 2009, I can take $5,000 per year out of my other investments and transfer that money to this new account. After that transfer, I need not pay tax on that money or its growth ever again. For me and the majority of Canadians, this is a great opportunity to save for the future without paying tax on that saving. Personally, I think this is the most brilliant idea a government has come up with in my lifetime – thus my desire to post something about it. I could get into details of how it will work but I know most people don’t share my passion for great financial ideas and details so I’ll spare you that, just hear that the new plan is wonderful for many millions of people and I don’t think the press has given it enough coverage. Hopefully financial institutions will. I also hope that people will develop the discipline required to actually make use of this new benefit. To give you a taste of what’s possible with the new plan, by simply placing $5,000 each year in this account instead of an RRSP, at my current return on my investments, I can look at buying a really nice new car every second year in retirement and giving the two year old car away instead of selling it or trading it in. Other options (at today’s prices) include taking a Caribbean cruise every second month, flying first class to Australia twice per year, buying two homes in Uganda every year to provide shelter for one widow and eight orphaned children, replacing my bed every second week, eating out at high class restaurants every night of the year, taking a trip to Disneyland ten times in a year – and staying at the Disneyland hotel, buying three Super bowl tickets (or one sideline ticket every 4 years), traveling (economy class) around the world 10 times (flight cost only), or paying 80% of the cost to send a child to any top university in the States. Are you getting the idea??? It’s a simple thing for me to do and I shall reap great rewards.

Now with all that being said, I’m not holding out too much hope that I truly will benefit from this great idea; reason being I don’t trust that the program will stay around. We can reasonably expect the current government to keep it as long as they are in power but nobody knows how long the current government will be in power and we have no guarantees they still be our government come 2009 when the plan is to be implemented. Governments have a tendency of making changes to things the previous government set up so if we end up with a change of government in the next year, I would hold out little hope that the program will actually come into place. It also seems governments like to change their minds as often as some men change their underwear, so while I’m excited about the program, I’m not overly confident it will actually happen. I’ll wait and see. But as long as this program is in place, I plan to take full advantage of it.