Logistics Matter Most

There is a thought among military people that argues this:

  • Dilettantes discuss strategy
  • Amateurs discuss tactics
  • Professionals discuss logistics.

The point is, it doesn’t matter how well you have thought through the situation or how carefully you have selected methods. Those are theoretical. Useful, but they won’t win by themselves. What matters is whether or not you can do it here in the real world.

You win by having breakfast, boots, and bullets at the right place, at the right time, in the right quantity.

Your personal financial plans follow that exact model.

It isn’t as easy as you think. Most advertising and promotion is misleading

Have you heard of an “RRSP Strategy?” Of course you have. Every bank branch in Canada has such a thought in January and February of every year.  The bad news – RRSPs are not a strategy. RRSPs are a tactic. They are a method to get you what you want – retirement income. Strategy is about the goal, the vision, and the resources you need to get it.

I believe the promotions are part of the banks tactics to get your money. I might not trust people who confuse the two. A Registered Retirement Savings Plan (RRSP) is one of the methods that might assist you in achieving that goal.

Nothing whatsoever about logistics

Logistics will address less exciting ideas. Things like:

  • How much will I need?
  • When do I need it?
  • How much must I save and when?
  • Can I adjust as times, needs, and wishes change?
  • What alternative methods are available?

Alternatives

The omnipresent RRSP. 

  • Advantage – tax deductible premium, flexible, easy to think about
  • Disadvantage – taxable withdrawals, must begin withdrawals after age 71, taxable in full at death
  • Neutral – investment choices are like any other portfolio, easy to arrange, monthly deposits if you wish. Reasonable annual limits, flexible

The TFSA (Tax Free Savings Account)

  • Advantage – no tax ever on accruing income or withdrawals
  • Disadvantage – not deductible when deposited, small annual limit,
  • Neutral – investment choices are like any other portfolio, easy to arrange, monthly deposits if you wish. Flexible

The Registered Educational Saving Plan

  • Advantage – government contributes, no tax on accruing income, withdrawals are the students income and likely untaxed.
  • Disadvantage – not deductible when deposited, small annual limit,
  • Neutral – investment choices are like any other portfolio, easy to arrange, monthly deposits if you wish.

Reduce debt

  • Advantage – riskless, avoids higher rates later, increases financial flexibility later.
  • Disadvantage – boring, payments are not tax deductible, looks unattractive when compared to an RRSP contribution. It could be and it depends on your marginal tax rate.
  • Neutral – Investment value is the interest saved,. The after tax cost of a mortgage is better than you can get with riskless bond investments. Credit card s are a phenomenal in vestment. Where else can you make (save) 24% after taxes. Depending on the contract, there may be limits.

Invest in other assets 

Could be a business, could be a vacation property, could be an open portfolio, could be art, bitcoin, gold, or anything else you can find.

  • Advantage – you have to do something with the money after RRSP and TFSA are full, and debt is gone.

The Key question

You cannot assume the money is available. You know your income, you know what your take home pay is , and you don’t know exactly what your lifestyle costs, or will cost in future. The money you save for retirement comes out of your income today. An RRSP uses some of the taxes you would otherwise pay. Other choices do not. They come out of lifestyle.

What do you want to give up to have it available?

The takeaway

Logistics is about balancing what’s available with what is needed and allocating it to a time scale.

If you think it is easy, you will do worse than if you treat logistics as the most important part.

Choosing a method is important, but only after you decide how you can deliver the result. If you don’t allocate the money, it won’t matter how good the method might be. What’s your budget for this?

When you do it matters too. Maybe pay down debt first, then use the payments to catch up in RRSPs and TFSAs. RESPS are different. Know how.

Logistics is always a limit. Without assessing the point, there is a tendency to think in ways that involve using the same money more than once. Logisticians are highly disciplined and always know what is possible, not what is wished for.


I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com

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