When do I invest in RSP’s?

For many people RSP’s are something they think about only between January 1st and March 1st.  Unfortunately, some people don’t even think of them at all. 

Why?  RSP’s should be built into your monthly schedule like paying your mortgage or paying for your car insurance.  People just need to think about it in a different way than they currently do.

Let’s call it paying yourself Forward.

Everyone knows that having a car is a big, most often a necessary, expense.  Cars chew up a sizeable amount of someone’s income.  Paying for food is also another necessary expense; as is shelter.  So let’s look at the average person’s necessary monthly expenses and let’s do it in a Maslow like hierarchy.

1.Food

2.Shelter

3.Heat and hydro

4.Clothing

5.Transportation

6.Cable and telephone

7.Entertainment

8.stuff

It’s important that a person has the resources to pay for the categories one to five.  If you have kids they still need the same things; so you add them into the same categories.  The quality and style to which a person pays for the first five in the hierarchy is a matter for living within your means or not. Unfortunately, a vast majority don’t…but that’s another article. 

However, the sixth category should not be cable and telephone, but rather paying towards an RSP.  The first five categories are necessities.  They are what people in a modern society need in order to function.  From six onwards they are what I call luxuries. 

If you look at this list it only considers immediate categories.  It does not take into account future categories.  We live in a world where our past affects or present and our present affects our future.  So why not prepare now for the future.  Build in future categories into our present hierarchy of needs.  For most we are already dealing with past categories in the form of bills. 

The real goal for a lot of people is to not live for the moment and the past, but plan for the future.  I know for some it is easier to have the gratification now and hope the future works out.  What this tends to do is add past categories in the form of bills to present and future categories.  This is poor planning and managing of your resources.

Let’s look at the above list again, but with past categories, present categories and future categories put in the order of how most peoples deal with them.

1.Food

2.Shelter

3.Past Bills

4.Stuff

5.Entertainment

6.Clothing

7.Hydro and Heat

8.Transportation

9.Cable and Telephone

The problem with this list is that it takes into account past categories and present categories.  The past category of bills is rather high up on the list because most people are paying now for things they’ve done in the past.

This is an unfortunate way to go about life.  People should be looking forward and to do that people need to put a little aside every month.  It doesn’t have to be a lot.  A little over time has an effect.  The ideal list that people should be striving for is:

1.Food

2.Shelter

3.Saving for the future

4.Hydro and Heat

5.Transportation

6.Clothing

7.Cable and Telephone

8.Stuff

You noticed I didn’t put bills in this listing.  The goal that everyone should have is keeping their bills to a minimum by paying them off every month and replacing paying past bills with saving for the future.  This will help people from paying for things they did in the past to planning for the future.  And isn’t that a better way.  In other words, everyone should be saving a portion of their income every month and putting it towards their RSP’s.