Just like the word “budget,” the word “downsizing” makes us think of bad things most of the time. Of course, downsizing is bad when companies do it and people lose their jobs. But when you do it, to your home and your life, it can be a very good thing.
People downsize for a lot of reasons. Sometimes, they do it because they have to, due to financial difficulties caused by debt or losing their jobs. But some people also do it because they want to do it, because they adopted more frugal lifestyles. No matter the reason, downsizing is a great way to save money. And, in today’s uncertain world, saving money should be a top priority for everyone.
The good thing about downsizing is that you can downsize anything. People downsize their spending by eating out less, buying fewer useless stuff and even by turning off the lights when they leave the room. The largest savings, however, come from downsizing your own home. Those who do this are able to cut away a large portion of their monthly costs, everything from home insurance, to mortgage spending, utility bills and more.
The cost of downsizing your home
Let’s say you have a home that’s worth $250,000. You’re retired now, the kids have moved out, you’re not working anymore. All of a sudden, your home becomes too big. Or at least bigger than what you need. Unless you want to include it in your will and leave it to your children, it really makes no sense to keep it.
But, if you sell it for $250,000 and buy a new, smaller house, for $200,000, you should be aware that you won’t be left with $50,000 in cash. The actual amount will probably be between $10,000 and $20,000, due to taxes, real estate costs, moving costs, insurance, and other fees and expenses, such as buying new furniture.
The money that you’re left with might not represent a fortune, but it’s not really a benefit of downsizing either. The real benefits of downsizing com after you buy the new home, when you notice how much you save each month on your mortgage, property taxes, utility bills and many other costs. Moving to a smaller home could help you save between $400 and $700 each month. Retirement can last at least 20 years. In the long run, that’s a lot of money.
The benefits of downsizing
Let’s take a look at some of the benefits of downsizing:
- Less square footage means less maintenance
When you get a smaller house, you have less cleaning to do, less maintenance, fewer things to fix. As a result you will also spend less money.
- Less square footage means a lower mortgage
A mortgage is something that you really don’t need during retirement. If you can pay it all off or at least reduce your monthly payments, you will be able to use the extra monthly money for many other things.
- You can pay off any other debt
You can use the money that you save each month to pay off your credit cards or any other loans that you may have. Don’t underestimate the importance of a quiet retirement. Getting rid of such financial burdens is a really big win for anyone. Not to mention that you will avoid debt.
- You can use the extra money for many other things
The extra monthly cash can be put to very good use. It can help you improve your home, you can invest it, or you can just use it to go on vacation and have fun.
The Bottom Line
Moving to a smaller home will definitely save you money. It all depends on you and what you plan to do with the money you save. If you’re smart and responsible, you can use it to improve your finances.