Having finished my taxes I was thinking about just how nice it is to own a home. If I did not own one I would have owed the government money, as it is I got a refund. So what exactly are my favorite tax deductions for home ownership? Glad you asked:

1. Mortgage Interest

You can deduct all your interest payments for your home (up to a certain amount which I have not reached). This is the biggest deduction and the one that makes the biggest dent in my taxable income.

2. Property Taxes aka real estate taxes

Property taxes are fully deductible from your income. You can’t deduct escrow money held for property taxes until the money is actually used to pay your property taxes. A city or state property tax refund reduces your federal deduction by the same amount.

3. No Capital Gains

Ok so this isn’t really a deduction, but its even better. As most of you know by now I love capital gains like I like a swift kick to the face. Thanks to the Taxpayer Relief Act of 1997, buying a home can be a tax shelter. Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the last five years. Single people get to keep up to $250,000 tax free. Since I won’t be making $250,000 profit on any home sales anytime soon, I think I can forget about that cap for the time being.

4. Points

Your mortgage lender will charge you a variety of fees, one of which is called “points.” A point is calculated at 1% of the loan principal. At least one point is fairly common and it adds up. One point on a 200k loan is 4 grand. You can fully deduct points associated with a home purchase mortgage. You cannot deduct a mortgage broker’s commission. Refinanced mortgage points are also deductible, provided they are amortized over the life of the loan. Homeowners who refinance can immediately write off the balance of the old points and begin to amortize the new.

5. Home Improvement Loan Interest

If you take out a loan to make substantial home improvements, you can deduct the interest on this loan. There isn’t a dollar limit on this deduction you have to actually be adding something to your house. A good example would be finishing the basement - not just repairing broken things.

This article will save you thousands, I promise you.  Number one alone is a monster.  Now here are some ways to save money on your car that you probably  haven’t seen around the web that I have learned through trial, error, and driving everything from the worst beater you can imagine (an old datsun 210 that looked like a lemon) to a new sports car.

1) If a light comes on on your engine that says “Service Engine Soon” Don’t rush over and pay $100 (I have made this mistake) for the local dealership to tell you whats wrong.  Go to autozone and they will give you the code your engine is throwing FOR FREE.  Then go home and google the code.  You can save yourself hundreds, even thousands of dollars doing this.

2) Do not use the dealer to make repairs unless you absolutely have to.*  This is especially true on older cars because they are much less complicated as far as electronics go.  However even on new cars independent repair shops generally will be just as good and charge hundreds or even THOUSANDS less.  The trick here is to make sure and find a reputable repair shop in your area.  As your friends and coworkers if they know of anything and if all else fails try the internet.

3) Whatever you do, do not buy an extended warranty.*  There was a survey done and the extended warranty was worth it only 1 percent of the time. Ouch.

4) Take your car to jiffy lube or do your oil changes yourself.  There is nothing magical to doing an oil change, anyone can do it if you read up on it.  On the other hand Jiffy Lube does it for 40 bucks.  At a dealer you will usually pay over 100 dollars.*  Ridiculous.

5) Do not buy premium gas unless your car HAS to have premium gas.  This will save you hundreds.  There is absolutely no advantage to using a higher octane gas if your car isnt knocking (making a click click or clunk clunk noise) when it is running.  It is not a special treat that will make your car run better.  I know in some parts of the country the LOWEST octane you can get is 91.  I promise you you will never need higher than 91 octane as far as current gasoline cars go…and thats the mechanical engineer in me talking not the personal finance guru.  Worst case scenario lets say you live in colorado like me and you put 87 octane in your new high compression engine and it knocks a bit.  Go grab an octane booster from autozone, or fill the rest of the tank with 91, and problem solved.

Hope these help, I know there are a lot of tips out there “inflate your tires to the correct pressure” “change oil <x> miles” whatever, we’ve all heard them; take these ones to heart and you will save even more.

Ive heard some rumblings about stock market instability and the fact that the new forever stamps are another thing to invest in since postage rates climb fairly often. However they are NOT a good investment. To the right is my new and improved design for the forever stamp. Lets go over why:

1) Buying a ton of stamps sucks. Do you really want to go into the post office and buy a truckload of stamps? Added bonus they WONT EVEN SELL YOU that many. Thats right, they are limited to a “reasonable” quantity. Though it might be funny to walk into the store and ask for 10,000 stamps, I’m pretty sure they wont consider that a reasonable quantity.

2) You can’t even sell stamps for face value. Check ebay. Just because something costs 42 cents doesn’t mean that you can buy it and turn around and sell it for 42 cents.

3) Why aren’t you putting that money into your debt payoffs/retirement fund/emergency fund/index fund/fund to go to cabo?

4) The postage rates are increased yearly based on inflation** and this just in: pacing inflation is not a good investment.

**Our government works in strange, mysterious and non efficient ways, so who really knows.

5) There are better ways to spend your time and messing around with stamps. Yeah I know that is pretty general, but lets think this through. Ok so you buy thousands of forever stamps. You hold on to them for a few years. Now its time to sell. Where are you going to sell thousands of stamps? Ebay? To a store maybe? Logistically its just not feasible. I will probably have a nightmare tonight about running around from store to trying to sell them my crappy boxes full of stamps.

What are forever stamps good for?
Convenience. Buying one cent stamps is annoying when they hike rates. So if you hang onto stamps for a long time, buy yourself some forever stamps to reduce the hassle. Otherwise, leave em alone!

There is something that gets left out a lot when the topic of personal finance comes up. It is one of the most simple things to grasp, yet also one of the hardest to do. It is something that I personally am terrible about if I don’t watch myself. Ok enough suspense already, wheres the beef?

The secret is simple:

Do not buy things you do not currently have enough money to buy.

Ok, you’re thinking, thats pretty obvious. But is it really? Lets dig a little deeper here. If you are like me (note: not referring to good looking and intelligent) then how many times have you said to yourself “well, I have extra on my next paycheck so I will just fit it in there.” Well, there is a good chance that something else will come up next pay period, so then both the original charge AND the new charge get put off. This is what I like to call the reverse snowball. Snowballing is a common metaphor for how to get rid of debt….well this is the best way to build debt.

Here is a a good example. In the consulting environment I get paid a bonus based on how many billable hours I worked for a customer in a given month. I do not figure this into my budget and it varies wildly based on what customer, what Im doing etc etc and its always paid on the second paycheck of the month. For the first part of the month, if I know Im getting a good sized bonus for the month I will overspend outside my budget because, hey, extra money is coming. The problem is that I never know exactly how much it will be and it makes it very easy to get carried away and go wild with the spending. Yes, even a financial titan such as myself will be defeated occasionally by spending temptation. Its my Achilles heal if you will. Ok enough with the greek mythology. Lets strategize:

1) Stick to the budget except in case of absolute complete and total necessities. Medical expenses, car breaks down, furnace goes out and it’s so cold your beta fish is swimming under a layer of ice (true story)….these things are ok. NFL Sunday ticket is calling your name, not ok (also true story).

2) Budget according to only what you KNOW you will make.

3) Make an emergency fund. Yes I know its easy to use credit as an emergency fund, but you should be putting money aside anyway.

4) Be honest with yourself. Most people I know are masters at telling themselves they can easily pay something off later. Don’t do it.

5) Take care of yourself and your things so that you stay healthy, and they stay working. The best way to cut out medical and other expenses is preventative action.

Bonus: Pay yourself first, this will work wonders in keeping you to #1.

I generally advise against buying a new car because of the obvious depreciation of new cars. You lose hundreds (or thousands) of dollars just driving the car off the lot. That being said, I do own a new car and for those of you planning on buying one, it really boils down to a few things:

1) Know what you want and research it. Research your car. Research where you will get your car loan. I suggest a credit union.

2) Download my New Car Buying Price Calculator. For things such as the factory invoice price, those can be easily googled.

3) Stick to the calculator, do not let them say there are other necessary fees. There are not. I have bought two new cars in my relatively short lifespan and both times I have told them exactly what I will pay and both times I told them how much I would pay. They both resisted, I got up to walk out both times and both times they recanted and agreed.

4) Do NOT finance through the dealer. The guy in charge of finance will try to talk you into a billion different things. Say no to every single one. He makes his commission on longer warranties etc.

5) Research the internet for sites that give indepth looks at what to do. Here are some good links to read through:

Car Buying Tips

Edmunds (research)

Car Info

Smart Sense Car Buying Guide

I recently was rechecking my credit to see where I am at these days.  When I bought my house my score was around 760 but since then I had one nasty occurence where I forgot about a bill and it went something like 90 days late and I got a black mark on my credit.  I remember years ago I had looked up what on earth goes into the credit score…and the truth is, no one knows for sure what the EXACT formulas are.  Its some sort of industry black magic where they are afraid to give away the secret.  In any case I did come up with some things that I had been told by various people that, as it turns out, are about as truthful as OJs denial.

Myth #1 - Checking your own credit will lower your score
You can check your own score as many times as you want without hurting your score, but make sure you do it via a legit site and not at “Joes one stop credit shop.”  One example of a good place to go is right to the source, such as equifax. 

Myth #2 - I have to have perfect credit to get the best rate
The truth is, you just have to have a GOOD score to get the best rates. Generally a score of 700 or higher will get you the best rates available.

Myth #3 - You only have one credit score
 Actually, you have three credit scores, one from each of the three major credit bureaus.  They vary between them, so its not a bad idea to check all three.

Myth #4 - Closing old accounts will help improve your credit report score
Canceling old credit accounts can and generally WILL lower your credit score because it makes your credit history appear shorter.  If you have old accounts, keep them open.  Unless you have a ridiculous amount open, having too much credit available is much much better than botching your credit history.

Myth #5 - Your age/income/sex/race/ are factored into your score
They aren’t.

#1 - Start your job search early
A mistake a lot of people make is that they dont start looking for a job until they are well into their senior year of college. A much easier route to take is to get an internship while you are still in school. Most interships anymore (at least in tech fields) are paid internships. My entire career has been built on starting as an intern and working my way up. It has worked even better than I ever thought it would.

#2 - Apply for a lot of jobs
This one seems like it would be obvious, but I have known people who applied for two or three jobs and then complained when they didn’t land one of them. There is absolutely no reason NOT to apply for a job. Hell, apply for CEO of General Motors if you want, the worst a company can say is no.

#3 - Learn to interview well
If you make it to the interview, make sure you are prepared. I have never interviewed for a job and not received an offer. This is NOT necessarily because I was the most qualified candidate or the best fit for the job. It’s because for every interview I was prepared. This means know what you are talking about, do your research, dress up, and get their early. Another kind of overlooked point is to make the interviewer comfortable and relaxed by being relaxed yourself. I had one interview where they never once ended up asking me a technical question because the interviewer and I BSed about common interests the whole time. Thats an extreme case, but as a general rule, the more the like you personally, the more they are likely to pick you over someone with slightly better qualifications.

#4 - Build a good resume
This is the first thing potential employers see and for most people, the last. Even the most qualified, intelligent individual can destroy their chances at a job with a poor resume. My brother once had a perfect chance for an internship he really wanted but his old spell checking program didn’t check the spelling on his bolded words. That was enough to disqualify him from the job. Make sure its thorough, correct, and clear.

#5 - Be flexible
Just because you got your degree in X doesn’t mean you HAVE to apply only for jobs doing X related things. Lots of jobs look for a degree, any degree. My dad has his degree in physics, but he didn’t want to work in a lab so now he is a marketing specialist. There are a lot of jobs out there in a lot of different fields….don’t let yourself get pigeonholed.

Top 5 in a semi ordered fashion:

#1 - Lack of a Budget
Most people do not have a monthly budget.  Infact its staggering how little idea most people have of where their money is going.  When I was first looking into organizing my finances, I realized that I had been spending over $800 a month on eating out.  $800!  A friend of mine that was also organizing their finances figured out that they had spent over $100 a week on CDs and DVDs on average.  This is the absolute first thing to do when you want to clean up your finances.  Check out my budget calculator on the downloads page.

#2 - Missing Bill Payments
How often do you rent a movie, then forget to take it back until it is 3 days overdue?  How about that cable bill that you put off paying?  Small charges for late fees add up.  Lets say in one month you have 2 overdue movies, 1 late bill payment, and 1 late credit card payment.  You could be paying over $50 in fees that are absolutely unncessary.

#3 - Not maxing out your companies match on 401k
This one is simple.  If your company matches, say, 3%, you should be putting at LEAST 3% in every month.  This is FREE money.  FREE!

#4 - Racking Up Credit Card Debt - and then paying the minimum
Spending more than you bring is is a bad idea(suprised?).  Not paying it off quickly is even worse.  This goes along with not having a budget set.  Lets take for example someone I worked with a few years ago.  He bought a brand new TV on his credit card.  He was excited because it was ‘only’ costing him $80 a month.  By the time he was done paying it off, his $2100 plasma TV cost almost $3000. 

#5 - Buying a New Car
This one is near and dear to my heart.  Why?  I am guilty of it.  A new car is one of the absolute worst investments you can make.  Ive seen more people spend too much on a new car than I have seen frat boys passed out on a saturday night (almost) “But Jesse I just started this new job and Im getting paid well….”  then put aside the money you would spend on the new car until you have enough to buy a late model used car. 

#1 - I am going to come out of school and be a project manager

If I had a dime for every person I’ve known that has come out of a school with a BS in business that thought they were going to be a project manager straight out of school, I would have the money truck parked out in front of my mansion in laguna beach.  The truth is that the vast majority of people will be in any given industry for quite a while before they will move into a project management role.  Just because you have learned some pm techniques in classes doesn’t mean you are ready to come into a business and coordinate projects. 

#2 - I am going to come out of school and be a CEO/Top management/etc

This is less common than #1 but even more ridiculous. 

#3 - I got my degree in <insert major> so I have to get a job doing <insert job related to major>

Many places are much more concerned with your experience and your interests than they are about what your degree is in.  In fact, in my office there was a guy that had his degree in philosophy but was doing computer science type work.  The vase majority of people being disqualified from jobs are disqualified by themselves and not the employer.

#4 - GPA matters a lot

The simple fact is that, straight out of college, GPA might considered, but any further than that no one cares.  If two candidates are applying for a job and one has a 3.2 GPA and the other has a 4.0 GPA, if they both get interviews, if the 3.2 interviews better than the 4.0, 99% of employers will hire the lower GPA graduate.  Experience weighs even MORE heavily into the equation.  Simply put, don’t get too hung up on your GPA.  I had a friend who was a smart guy, but just hated going to class.  He had a GPA of 2.8.  He applied for a job that “required” a 3.5 GPA at Hewlett Packard.  Guess what?  He never put it on his resume and they never asked….and he got the job.

#5 - I need to grow up and buy <insert expensive item>

Just because you have graduated doesn’t mean you need to grow up and buy any expensive items such as a car/house/etc.  There are situations where it makes sense and others where it doesn’t, but everyone seems to think it’s some sort of right of passage into adulthood.  On the contrary, it can just as easily put you on the wrong financial path.  One example of a situation that it was a good idea is that my girlfriend is selling her condo for a good profit, and under contract for a house.  In her case, it is the right fincancial move for her.  On the other hand, I have a friend who bought a house right after graduation that he is now trying to sell, and he is minus 15k in equity on it due to the housing market and a home equity loan he took out.