Our lives are full of rules. From the greatest one, The Golden Rule, to the most infamous one, "Don't draw to an inside straight". What we do with the majority of them defines us.
We have so many choices when it comes to rules. We can adopt them, ignore them, rejoice over them, accept them with reservation, or avoid them as if they didn't exist. The one thing I am sure of is that not one of us can say that we follow each and every one. In fact, if we took an inventory, we might find we are on the minority side of rule following and aren't inclined to change. Let's take a look.
Do you exceed the speed limit, not only the big one on the highways, but the smaller numbers around the city? Have you crossed the street outside of a crosswalk? By avoiding or ignoring these rules, will it start us on the way to a life of malfeasance? I think not. Let's ratchet the discussion up a bit and get your thoughts.
Have you "fudged" on your income tax? What if I told you that you unintentionally deducted something you aren't allowed to deduct? What would you do?
When refinancing your house, you are allowed to pull $100,000 out in cash above your current loan to do what you wish with the money. The interest on the entire $100,000 can be deducted, even if you don't put any of the money to work in rehabilitating or adding on to your house. The interest on any monies over the $100,000 is not tax deductible, in cases where none of the money went toward the upgrading of the house. This could present a dilemma to people who are in this situation and have been for some time.
Are you getting the picture? When I was young, it was a badge of honor to sneak into anything you could. I am definitely a reformed sneaker with perhaps some small relapses. While I was in college we always attended the post-game parties of the visiting team and would munch on the h’orderves, drink the drinks, and commiserate or celebrate the other team’s performance. I haven't done it in decades, but it sure was fun. I know some people who buy movie tickets away from the theaters, and even though they are young, select the senior citizen’s tickets. They get them in kiosks or online and save a few dollars. I, myself, would pay a lot of money to not have the senior citizen ticket handed to me without saying anything.Some talk of the rule of thumb that you shouldn't refinance if you can't save 2% on the rate. On a $50,000 loan it might not be enough, while on a $1 million loan generally .5% is enough. When you are going from a rising variable loan to a fixed rate, does it matter what the current savings would be? On the other hand, if you could get a great variable (low margin) would you take it and just break even? Be careful of rules of thumb, except when you have a hammer in your hand.
My dear mother had rules that began at sunrise and ended at sunset. One of my favorites was that you couldn't go swimming after you ate for one hour to avoid cramps. A side note, my mother not only couldn't swim, but she wouldn't even go into the water. It didn't matter the size of the meal or the size of the person eating. The rule was later revised to 1/2 hour, as she was losing control. She also couldn't drive, never learned and didn't want to, but nevertheless she was a masterful back seat driver. Rules or not, she was the best!
My father, who was born in this Country, but raised in Europe after his father died, had only one major rule: Never go out after you shower in the evening because you will catch a cold. If enough people had followed his rule, he could have single-handedly terminated evening dining and the movie industry.
Some people have rules that points should never be paid on a mortgage loan, while others feel you should always pay at least a point, if not more. A point is one percent of the loan and in most cases is used to buy down the interest rate. I feel that you shouldn't pay points on 30-year loans because you won't be keeping the loan. On the other hand, a point on a 15 year could make sense because you will make up the cost in a few years and most people hang on to the 15 year until it is paid off, or at least for about twice as long as those who take 30 year loans. There are other times where points make sense and I will cover those in future columns.
In real estate, we talk about location, location, location, but sometimes forget that it can mean buying right smack dab in the middle of progress. When I was young, a corner house had premium built in, but now no one talks about it. Everyone talks about buying the cheapest house in the neighborhood, but I know many people who have done well with the most expensive house in the neighborhood, as everyone has a secret desire to be the one in the "castle".
Listen to the rules and make up your own mind. What works for one doesn't always work for everyone. Some rules are important, and as you could see, some are just fun to look back on. I like to try to follow the Golden Rule, and somehow a lot of things fall into place. Don't discount knowledge, however, especially in this complex world we live in.
One last rule and we’re done: Laughter IS the best medicine!