Eliminating Debt Strategy – Get Rich Slowly

Saving Money

Turning consumer debt into long-term savings is doable.

A lingering credit card balance is costing you money each month when it’s not paid in full. So, it might be worth borrowing from the bank to buy enough RRSPs to generate a tax return that will pay off that credit card debt.

Sure you have the monthly loan payment on the RRSP debt to cover but the interest rate on a bank loan is typically significantly lower than a credit card’s, and those RRSP investments are making you money over the long term. Unpaid credit card debts instead ding you over the long term.

There are plenty of online tools to help you figure out how much in RRSPs you’d need to borrow to generate a refund large enough to wipe out a credit card debt.
But be sure to only borrow as much as you can manage to pay off in a short time and live within your means learning to pay off your credit card in full each month so that you aren’t left with an RRSP loan to pay, as well as a newly accumulating consumer debt.,

And when the debt of the credit card is paid off, as well as the RRSP loan, consider setting up a monthly contribution to your RRSP because that bank loan has already instilled a habit of dedicating money in your monthly budget toward long-term savings.

For example, if you were paying $400 each month to pay off that RRSP loan to the bank over the past two years, when the debt is wiped out turn that loan repayment money of $400 into an investment builder. You’re already in the habit of budgeting for that every month.

Other ways to reduce debt is to transfer it to a lower-interest card. You’ll pay off more of the bulk of the money owed faster.

You can also convert non-deductible debt into deductible debt. In some cases those with an investment portfolio as big as their mortgage, for example, can sell off the investments, pay the mortgage and then set up a line of credit to buy investments. The benefit is that the interest you are paying on the line of credit would become a tax-deductible expense.

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