The beginning of the year is always a good reason to set new goals that help us achieve a better version of ourselves. And to improve our lives in the area of personal finance, economist Laurence Kotlikoff shared on CNBC some rules that he has learned and teaches people to keep their portfolios strong and healthy .
Recommendations for a better economic life
1. Don’t borrow to pay for college.
Kotlikoff recommends not doing it because it is risky and expensive, his suggestion is to seek scholarships and apply to less expensive institutions.
2. Own your home, don’t rent and try to buy with cash
If they have the possibility to do so, the economist considers that it is better to have the money invested in the house because it is a way to protect themselves from federal and state taxes on income from assets.
3. Mortgages are fiscal and financial losers
If you have a mortgage, it is best to pay it off as soon as possible . Kotlikoff gives as an example that if you had $100,000, invested in a bond that earns 1.5%, you would have $1,500 in interest income over the course of a year. But if it is a debt of $100,000 at a rate of 3.2% that can be paid right now, it would save $3,200 over the course of the year in interest payments.
4. Your perfect home can be much cheaper in different areas
The expert recommends evaluating variants such as state income tax, state wealth tax and state inheritance tax, which in the long run can mean significant savings, depending on the state in which you decide to live.
5. Choose jobs that everyone but you hates
Some jobs that people don’t want or like get more pay than people with the same skills who work in more comfortable jobs. The key to taking advantage of it is finding something you like that others don’t.
6. Not worrying about career and job changes
Sometimes the fastest way to an increase is to obtain a credible external offer, even if it means a change in activities that we are used to developing.
7. Work on your own
Starting the right business the right way has a high chance of increasing your remaining future earnings and will provide unmatched job security. The expert suggests thinking of ways to turn your hobby and interests into a side job.
8. Keep thinking about the future
The economist recommends not to stop wondering if we are in the best career, if we should make changes, if we are in the right job and suggests reviewing our situation every so often with important people such as our partner or trusted close friends.
9. Marriage is better than long-term partnership
Marital status may mean somewhat higher net taxes, but it comes with a variety of valuable implicit insurance agreements, which the formality and legality of the marriage help enforce.
10. Early retirement is financial suicide
There are situations when it makes sense to retire early, but few think of early retirement for what it is: a decision to take the longest and most expensive vacation most of us can’t afford. Retirement benefits can come at a high price, so proper planning is essential.
Laurence J. Kotlikoff is an economics professor and author of “Money Magic : An Economist’s Secrets to Get More Money, Less Risk, and a Better Life.” His Twitter is @Kotlikoff.