Downsizing your living arrangements has become a popular topic in the financial community and rightly so. There are many financial benefits to downsizing your home such as reduced expenses and increased cash flow as well as enabling you to add more to your retirement assets. Pair those with other lifestyle benefits like freedom and flexibility to do the things you always have wanted to do, and the argument for downsizing becomes more prominent.
Many Americans are considering downsizing their home because they:
- Are approaching retirement
- Have become empty nesters
- Are overwhelmed with the upkeep and maintenance of the property
- Realize they have just too much empty space
According to Census data, in 1973, the average home was about 1,660 square feet in total living space with 3.01 people living in that space. By 2019, the average new home was more than 2,301 square feet but the number of people living in each home dropped to 2.52.
What are the benefits of downsizing your home?
Reducing the size of your living space has many financial benefits:
- Reduced mortgage payments
- Less real estate taxes
- Lower utility costs
- Lower insurance costs
- Less maintenance costs
All of these reductions in your expenses can lead to significant savings. It’s certainly up to you on what you do with this extra cash. However, now you have the option to either invest this extra cash for retirement, reduce your debt from loans or credit cards or used for travel and life’s rewards if you have already accumulated enough savings for retirement.
Downsizing is a great motivating factor for embracing simplicity and eliminating anything you absolutely don’t need or value. Don’t think of it as parting with memories. Think of it as moving into a new phase of your life, one that is less stressful and more relaxing or fun.
It took you years to accumulate your belongings and the process to de-clutter can be overwhelming. Start now so you can take the time you need to inventory your belongings and decide what things are important to you and what you can eliminate. Some items will be easy to dispose of, but others will make you stop and think. To make this easier, categorize your items as those which you should:
- Give to relatives
Items you cherish and which have sentimental value you keep. These are the pieces with the fondest memories. Give those items of value that you don’t need to family members now so they can enjoy them.
Items that have value but you don’t want can be sold at a yard sale, on Craig’s list or on eBay or you can donate them to your favorite charity. Recycle items you can and throw out the trash.
Although usually not the focus of downsizing, one of the positive side-effects is a simpler lifestyle free of stress and mundane tasks. Moving into a smaller home or a townhouse eliminates a lot of tasks that can keep you from doing the things you dream about. A smaller home and fewer belongings:
- Take less time to clean
- Need less routine yard work
- Cost less to maintain
All of which means more time and money to enjoy activities you want to do and living a more balanced lifestyle. When you downsize and simplify, you can be more focused on goals and spend more time doing things that are important to you.
Freedom, Flexibility and Financial Gain
Your primary residence should not be viewed as an investment but should be valued as a quality of life for you and your family. Spending your time either trying to earn money to pay for a large lifestyle or worrying about having enough money to pay your bills can be draining. Downsizing your home and ultimately your lifestyle takes you off that stressful treadmill and gives you more time and money to enjoy the things you want to do.
Listen to the following for more on the benefits of downsizing your home. And contact us if you want to discuss your retirement planning options.