Every conversation that I have had discussing the benefits of buying versus renting has eventually turned to the Mortgage Interest Deduction.
(What? Doesn’t everyone have those conversations? Just me?)
If you itemize deductions on your tax return, the Mortgage Interest Deduction allows you to deduct the interest that you pay on your mortgage from your income. This ultimately lowers your taxes and, in turn, your cost of home ownership.
This perk is often mentioned to me as a key reason for buying a home rather than renting.
There are a number of reasons why I disagree with this approach, but today I want to explore one in particular.
The Mortgage Interest Deduction could be gone soon.
I apologize in advance for the inherent humblebraginess of vacation pictures. I did warn you, though.
I am generally a pretty frugal person. Three of my lastfour posts have been about saving money. I’ve written about cognitive biases that get in the way of saving money. I’ve written about the best way to hit savings goals.
And yet, I just spent a whole bunch of money on a three-week vacation to South Africa and Spain. This came thirteen months after a trip to Peru. Which itself came eight months after a honeymoon in the Bahamas (which, to be fair, was paid for with hotel points).
This may seem out of character or incongruent with my savings focus. But I don’t save money for the sake of saving money. I don’t intend to be the richest man in the cemetery. And while I would love to reach financial independence, I am not aiming to get there as soon as possible by any means necessary. Instead, I want to live my best (and happiest) life with as little waste as possible. Continue reading “How to Buy Happiness”
A lot of people set resolutions to save more money. In fact, it was the third most popular resolution for 2015, behind only “lose weight” and “get organized.” But as we’ve noted before, only 8% of people successfully achieved their resolutions. So how do we go about making sure that we are the select few who actually do save more money?
Do you focus on the Latte Factor and cut out your daily coffee? Do you drive around in search of the best deals or spend your Sundays clipping coupons?
Today I want to revisit the world of housing. As an (almost) 30-something, buying a house is something that I have spent significant time thinking about. If my Facebook feed is any indication, then I am not alone in this.
Hedonic adaptation is the human ability to get used to pretty much any situation. This can be great when bad things happen to us.
One study measured the happiness of people with end-stage kidney disease against the happiness of healthy people. The kidney patients had to spend nine hours per week going through hemodialysis and stick to a strict diet. Both the kidney patients and the healthy controls felt that the healthy people would be significantly happier.
But they weren’t. Despite everything that the patients had to go through, they were just as happy as their healthy counterparts. They had quickly adjusted to their new situation and had adapted to it.
This is a really powerful ability! We can be happy regardless of what we are going through!
As an older Millennial (I liked it better when they briefly called us Digital Natives, but unfortunately I don’t control the generation-naming zeitgeist) I grew up with all of the Boomer authority figures drilling into my head that buying a house is a great investment.
Renting is just throwing money away. Nobody is going to be making any new land any time soon, so home prices can only go up!