Saving money has long been recognized as one of the most practical ways for individuals to improve the quality of their lives.
Except of course for those who have some sort of trust fund, or other kind of large amount of money that is just given to them, which most people don’t, folks who want to own their own homes, as opposed to renting, generally have to save up for a down payment.
In my community, on average an individual can rent a 2 bedroom apartment or mobile home for about $600 a month, more or less depending on the quality of the unit of course.
From my personal experience, if an individual is willing to settle for something habitable, but in need of improvement, said individual can purchase an older mobile home on a rented lot outright, for as little as $3,500.
The average lot rent in this area is between $200 and $300 a month, and after making said purchase one can expect to pay about $200 a year in property taxes.
If you break it down, an individual who is presently paying $600 a month for a place to live can reduce their own cost of housing by $300 a month, or more.
I won’t go so far as to say this is necessarily easy, in many cases, putting money aside requires sacrificing some of the comforts one already has, but it is definitely worth it.
Although the economic benefit of reducing ones cost of living should be obvious, before I continue, I would like to elaborate a bit.
The financial transaction between a landlord and tenant is taxable, but a lot of people don’t know just how much. In fact, judging by behavior, I have come to the conclusion that at least some people, don’t realize that it actually costs money to maintain a rental unit, but that’s a separate issue.
So these are the facts. According to tax law, regardless of how a landlord operates, rental income is referred to as passive income, and is subject to specific guidelines.
Unlike many, I actively participate in my business. I don’t subcontract with a professional to manage my properties. I do all of my own paper work, and although my back finally let me down a couple years ago, and I do hire people to help me on and off, I still do the maintenance I am physically able to do. For this reason, I am lawfully permitted to deduct certain expenses, like maintenance material. Obviously this reduces my taxable income, and therefore the dollar amount I have to pay for income tax every year.
As a conservative, I am profoundly aware of the fact that money that goes to taxes, doesn’t grow. The government does not produce a product, it’s that simple.
On the other hand, the money I have left after paying my taxes, does grow. The money I spend on maintenance materials has a positive effect in several ways.
The improvements I make, improve the physical quality of my units, which improves the comfort of my tenants, but of course the hardware stores from which I purchase said materials, use my money to pay employees, and to buy more of such products from manufacturers who also pay employees.
Of course the money I spend on products for my personal life circulates, and grows in the same way.
On the other hand, there are plenty of landlords out there that do subcontract with property managers, for everything. Even though these folks still pay for the same expenses, and also have the added expense of management fees, these folks are not allowed to deduct a number of expenses.
The net result, these landlords have less money to put directly back into the economy.
I didn’t write this article to complain about the taxes I pay. Whether or not you think it’s reasonable or unreasonable is irrelevant. It is a fact plain and simple, and I’m getting to my point.
It is my opinion, that my community overall, and myself by extension, can enjoy a greater benefit if the service I provide, becomes less of a permanent necessity to the average individual, and more like a stepping stone.
I’m not looking at losing business if more people make the effort to save up and buy a place of their own. There will always be ambitious people, in need of a home while they work to move on to their own independence.
If I have successfully articulated my general understanding on this situation, you might think that our government, in their infinite wisdom, would encourage individuals and families to save up and work toward a more productive future.
Unfortunately, this isn’t the case.
I can’t think of a more presently relevant example, considering the attention to, and effects of, the Affordable Care Act, than the Montana Medicaid program.
The penalties, the ACA imposes on those who don’t qualify for Medicaid, but also can’t afford private insurance, is a situation on the forefront of the minds, of most considerate and responsible Americans.
If the left gets their way, and Montana does pass the Medicaid expansion in a special session, a small percentage of uninsured Montanans will be protected from the penalties, but these newly eligible Medicaid recipients will find themselves confronted, with a deliberately, scarcely acknowledged impediment to their social and economic advancement.
For those of you who haven’t looked it up on your own, the Montana Medicaid program has established eligibility criteria, in addition to income. For family Medicaid, a household is limited to $3,000 in assets, with reasonable exemptions like one vehicle of highest value, an individual’s residence, and tools and other assets that are essential for employment.
Savings accounts, are not exempt, and reasonably so. I don’t want somebody who has cash they can use to pay a doctor, asking for my tax dollars.
On the other hand, it is equally counterproductive, to discourage individuals and families from making an effort to improve their own means.
In this regard, the ACA is very much, a proverbial catch 22.
The State of Montana cannot eliminate the negative effects of the ACA, but we can choose not to make it worse.
You can call me cold, we’re all entitled to our opinion, but it is a long standing fact of the human condition, that adversity provides an individual with their greatest opportunity to discover their greater potential.
I cannot advocate relief from this burden for even a few, at the likely cost of limiting their long term potential. My voice for now, and this November and for as many elections as it takes, my vote will reflect my understanding of this situation.
All I ask is for any who read this article, to consider what I’ve said, use your own judgment, but most importantly, make your voice heard.
Glenn W. Uncles Jr.
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