Best Money Rules: 'Own Your Home' and 'Long Term Goals'

Living in an area like the Livermore Wine Country we are blessed with so many options and amenities. It is one of the best communities around and offers great schools, outdoor activities and is close to the beach and mountains, both a couple hours in either direction.

We all want the good life and thankfully there are steps to get there and live the best life we can. I can across an article that I wanted to share. Not every point I agree with, but most I liked and were simple. This is my pick of the top rules to live by.

1. Strive to own your home, not rent — and try to buy in cash. This is particularly the case if you’re a moderate to high earner. Having more of your money packed in your home is a way to shelter it from federal and state asset-income taxation.

Mortgages are tax and financial losers. Pay them off ASAP. Think about it: If you have $100,000 that you can invest right now in a bond earning 1.5%, you’d have $1,500 in interest income over the course of a year. But if you had a $100,000 debt at a 3.2% interest that you could pay off right now, you’d save $3,200 over the course of the year in interest payments.

On balance, you’d make $1,700 with no risk by investing in debt repayment rather than investing in the bond.

3. Owning a home can reduce longevity risk. Here’s another reason it’s better to own instead of rent. Let’s say you’re 70 and have found your dream location. Renting for the rest of your life runs the risk of rent hikes without the possibility of your fixed income increasing.

In contrast, if you owned your home, home prices can soar or collapse, but you’ll be insulated. Since you are neither buying nor selling your home, who cares what the housing market does? Your housing consumption is guaranteed through the end of your days.

4. Your perfect home may be far cheaper several time zones away. Or it may be someplace with no state income tax, no state estate tax, and no state inheritance tax.

Yes, things are more complicated. Land values in New Hampshire may be higher in light of the state’s tax advantage. And the school system may be better in Massachusetts. But who knows? You may be childless and happy to live in a tall five-decker with no yard.

5. Keep thinking about tomorrow. Are you in the best possible career for the rest of your working days? Should you make a switch? Is your current job in danger? Set a date every few months to do a career review with a spouse, partner or friend.

6. Your living standard is your bottom line. Simulate its potential paths based on alternative investment and spending strategies to see where these strategies can land you.

All lifestyle decisions — switching careers, moving homes, getting married, having kids, getting divorced — come at a price. Measure these prices in terms of your sustainable living standard.

The list above is a sample of the 21 Money Tips by a Harvard-trained economist - here is a link to the original article

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