Is it safe to temporarily sacrifice payments to our RRSP?

Q & A

My wife and I are planning on starting a family and building a house in the next 5-10yrs. Knowing the poor state of our finances and thinking we were not making enough money I took on the responsibility of our finances which was originally one of my wife’s duties (just the way it ended up since day one) and discovered many errors. We are both to blame and we have really pulled the reigns in tight. We have downgraded to a house with a smaller mortgage, we are selling one of our two cars (we are keeping the one that IS paid off and more fuel efficient) and I have given us each a $400/mth allowance to take care of everything we need as far as groceries, entertainment etc.

My question: is it safe to temporarily sacrifice payments to our RRSP (they are quite small at the moment and not really helping us) in order to help quickly eliminate our high interests debts? My budget is based on our current wages and since I receive a pay increase of $3/hr per year for the next 5yrs of my apprenticeship I am planning on being able to start making larger payments to our savings once our debts are paid off. In my opinion the high interest debt costs more in the long run then our low interest savings. Thanks

Name withheld

Congrats of waking up and smelling the coffee. The fact that you’ve tightened up on your budget and gotten things under control is GREAT! And you’re not playing the blame game, which I’m very happy to see. Good on ya.

As to your question: I would not sacrifice savings for debt repayment. The problem with deferring savings is that there’s always a good reason not to save. Right now it’s the expensive debt. Next, it’ll be the house. There will always be things that are “better” use of your money than savings, if you don’t see the absolute necessity of having savings.

I would advise you to try and get the costs of your debt down. Negotiate with your lenders. Try to get a lower cost form of financing and consolidate. Transfer balances to less costly credit.