Ever since the Great Recession of 2009, when Americans watched the bottom drop out of the global economy, people have been looking for ways to simplify their lives. Tiny houses, the farm-to-table movement, and bestsellers on how to downsize and organize everything from garages to investment portfolios are an expression of the collective wish to become less dependent on consumer culture.
Moving into a smaller or less expensive home is the single best step you can take toward achieving this goal. A smaller house or less expensive house allows you to realize savings both on the initial amount you put down and the subsequent mortgage payments. In some cases, you may have accrued enough equity in your current home to purchase the new property with cash.
The savings don’t stop there, though. Smaller homes cost less to heat and cool, require fewer furnishings, and take less time and energy to maintain. A home in a less affluent part of the country will cost you a fraction of what you are used to paying for goods and services. Moving from the frigid North down to the Sunbelt can help you save thousands each year in energy costs.
It’s a big step. Changing where you live often requires you to change your attitude toward life, and that’s not something everyone is prepared to do. If you’re committed to the process, though, read on through the following tips to get some inspiration and direction for the journey forward.
Why Should You Consider Downsizing?
On average, Americans spend on about a third of their income on housing. This figure remains constant even in the over-50 demographic. According to the AARP foundation, older people not only skimp on necessities like food in order to make housing payments but also end up living in homes that are not adequate to meet their changing needs.
Downsizing to a less expensive home early in life allows you to save more of your money for retirement and other expenses, while downsizing to a home that is specifically designed for seniors early on in retirement can help you adjust to and grow into the new environment while freeing up money you can spend on quality of life purchases such as food and travel.
There are other reasons to consider downsizing as well:
- People who care about the environment will make significant reductions in their carbon footprint if they reduce the square footage of their home.
- Putting children through college these days costs $9,410 a year for state universities. Tapping into home equity is one solution for paying the tuition and other expenses. A smarter option is downsizing once your first child goes off to college. Your kid may have to double up with a sibling during holiday visits, but you won’t be saddling your kids with expensive college loans that could force them to move back home with you for good if they can’t find a lucrative job after school.
How Much Space Do You Really Need?
A growing number of adults have ditched their mortgage payment by opting to build a house small enough to fit on a regulation size trailer. That’s not a practical choice for most people, of course. On the other hand, do you really need that spare bedroom or bonus room?
Here are some things to consider:
- In some parts of the country, outdoor space can function as an entertainment zone, eliminating the need for large open concept rooms that are expensive to heat and cool.
- You can convert a master closet into a functional home office. Downsize your clothing as well, and you’ll be able to fit everything you need into a standing wardrobe.
-  Can your children share a bedroom if it means that they’ll be able to afford overnight camp, school trips, and a used vehicle that they’ll be able to drive?
Let your family have input in this decision and encourage them to weigh the costs against the benefits of the change.
Where Do You Want to Live?
According to the Livability Initiative, the second biggest expense after housing is transportation; in the auto-dependent exburbs, transportation costs can equal up to 25 percent of one’s disposable income. That’s a huge number, and it is why moving to the suburbs is not necessarily the most cost effective solution. In fact, downsizing to a condo or mixed use community closer to your place of employment could save you thousands of dollars each year.
If you are part of the 45 percent of Americans who work from home, moving to a more affordable region of the country makes good financial sense. Research communities and market trends, looking for places that have stable or gradually appreciating real estate prices and a low cost of living. Then narrow down a list of places that have the amenities and features you’d like. You will be amazing by how much money you can save by making smart choices about the geographic region, neighborhood, and community you choose to buy in.
Downsizing is a good time to reconsider your priorities. A lot of people live in big homes because that is simply a cultural expectation. There are rooms they rarely enter except to clean and decorate them. If you think that might describe you and your family, living in less space can be life transforming, an occasion to live by your own values rather than doing what you think other people approve of.
2 Point Highlight
“Smaller homes cost less to heat and cool, require fewer furnishings, and take less time and energy to maintain.”
“If you are part of the 45 percent of Americans who work from home, moving to a more affordable region of the country makes good financial sense.”
