In a few days, Jay Gatsby gets another chance to charm his way into our hearts. It wasn’t enough that he was the title character of the fantastic F. Scott Fitzgerald novel, The Great Gatsby. Gatsby also has been in the movies, played most notably by Robert Redford in 1974 and by Leonardo DiCaprio in the version that’s coming out.
One of the great benefits of owning a home comes when you file your income taxes. And if you haven’t done it yet, remember that April 15 is just around the corner.
You’ll have to itemize your deductions, of course. But if your mortgage is for less than $1 million, you can deduct the interest you pay each year – which makes up the largest part of your monthly mortgage payment. You also can deduct the cost of private mortgage insurance and any real estate taxes you pay on the home.
So what about home insurance? Sorry, for most homeowners, the cost of their premiums is not deductible. The exception is for those homeowners who operate home-based businesses. In that case, you can deduct part of your premium – essentially the amount that would pay to cover the portion of your home used exclusively for business. If this sounds complicated, it is – you probably should consult with a tax professional to make sure you’ve got this deduction right.
The other thing you must keep in mind if you have a home-based business is that it affects your home insurance. The liability coverage typically included in a standard home insurance policy might not be in affect should a customer be injured during a visit to your house. Be sure to let your home insurance agent know about any business ventures you operate – you could need business liability or other commercial coverage.
The bottom line is that homeownership likely means you’ll get a tax refund. Many people, of course, will consider the refund “found” money and blow it on a big screen television or a beach trip or something else in the luxury category.
Instead, why not invest your refund in something for your house? Maybe you need a new refrigerator, for example. Use the “found” money to purchase an Energy Saver™ model and you’ll save on electricity costs the rest of the year. Or you could start a roof replacement fund or install new countertops or blinds. One warning: If you do something that will increase the value of your home, be sure to let your home insurance agent know about it. Otherwise, you might not be fully covered by your policy.
One other suggestion: Use your refund to pay off your home insurance premium this year in a lump sum. You’ll likely get a discount for paying in full.
In this economic climate it is difficult for many homeowners to adjust to lower incomes and higher costs of living. It makes me think of how frugal my grandfather was, and yet his life also seemed so full. If your grandfather was anything like MY grandfather, you know what I’m talking about. Back then in the good old days people lived on less, because they saved what they had and didn’t waste a penny.
My grandfather’s garage was a prime example of this. His tools were kept clean and well maintained. Why? Because they were expected to last a life time back then. He had small reused baby food jars that organized and stored every spare screw, wing nut and other piece of hardware. Why? So he wouldn’t have to buy one when he needed it.
Nowadays, our possessions have become more disposable. We get a new cell phone every two years, a new car every five. Question is- how much money are we wasting by living this way? My guess is- a lot.
5 Tips for Living Frugal like your Grandfather Did:
1- Maintain your Stuff: When your car is due for a tune-up, take it in. When your furnace is due for a cleaning, get it done. So often the money we spend on repairing and replacing our “stuff” is due to the fact that it wasn’t properly maintained in the first place.
2- Buy only what you need: If you regularly toss out food that was purchased at the grocery store and never eaten, you may need to listen to this one. Think about what you can live on, make a list, and stick to it. Watch out for deals at the grocery store that urge you to buy two (instead of one) because you’ll save $.50. Unless you need that second item, you’ve just spent money you didn’t need to.
3- Don’t get caught up in technology: Don’t get me wrong on this one. New gadgets like smart phones and PDAs can come in very handy. However, do you need to upgrade to the latest version every time one is released? Definitely not. Do your research before you buy something like this so you get a product that suits your needs and will last for awhile.
4- Do it yourself: This one is for all your homeowners out there. Learn how to fix the washing machine, wallpaper the bathroom and change the oil in your car. Being a jack-of-all-trades will let you avoid paying hired help and give you a sense of accomplishment.
5- Don’t spoil your kids: Love them? Yes. Shower them with love and affection? Of course. However, spoiling your children with too much not only affects the way they value their things, but makes you spend money you could be saving for your retirement, or whatever else you’re saving for. Opt for family “experiences” over buying material objects and let your kids grow up more the way that we did.