The idea of “downsizing” a home is usually associated with retiring. This is because most adults in retirement and live independently, without their children, tend to move to a smaller house for various reasons. But realistically, anyone can downsize and move to a smaller home if they want to.
During the pandemic, many homeowners had their homes renovated and even expanded. The pandemic emphasized the need for more space in a home. Employees working from home need a dedicated space to focus on work while students need a dedicated study area.
But sometimes, bigger isn’t always better. And in the middle of a pandemic, moving to a smaller idea isn’t a very bad idea. In fact, there is still a fair demand for smaller homes, which is perhaps influenced by the popularity of micro-living. Also, downsizing can be a smart decision considering its financial benefits.
Lower Mortgage Payments
When someone wants to buy a new home, most financial experts recommend following the 28/36 rule where a person should only spend up to 28 percent of their monthly income on mortgage and other housing expenses. But realistically, many people go over 28 percent, perhaps because they don’t have a high-figure income or live in an expensive location.
One way people can adhere to this rule is to downsize or to live in a smaller space. This way, they can save money on mortgage payments. And they can either spend what they saved on other expenses or not spend it at all.
Better Cash Flow
Downsizing can also improve your cash flow. You can use the money you got from selling your current home to pay off your mortgage for your new, smaller home. Then you can save the extra money or use it to pay other home-related expenses, such as new furniture or your utility bills. Although, this will be possible if you do a thorough search of residential properties for sale and find the best deal you can get.
Lower Utility Bills
Having a smaller living space means you need to use lesser utilities. For instance, it doesn’t take much energy to illuminate a smaller space. Heating and cooling a smaller space also consumes less energy since it’s easier to insulate. Thus, downsizing means a person can save by lowering their spending on their electric bill.
In addition, you will tend to own fewer things, such as clothes, bed linen, dishes, etc., when you live in a small home. This means that you can also lower their water usage, which in turn saves energy as well. Thus, by downsizing, a person can save money on lower utility bills.
No Room for Nonessential Clutter
Sometimes, having a spacious home might force you to buy many things to fill that space. This can lead to unnecessary spending or even overspending on things you don’t need.
You’ll also accumulate a lot of clutter at home, which has negative effects of its own. For example, in a worst-case scenario, you might have to spend on a professional organizer to help them with their home clutter. You might also feel stressed and be unable to focus on work because of the cluttered and distracting environment.
Moving to a smaller home can help in this situation. If there is no space to put new things, you’re less likely to buy nonessential things.
Reach Financial Security
With your mortgage for your smaller home paid off and lower home expenses, you’ll be free of debt. So you can focus on building your savings instead. For example, you can start your retirement savings if you haven’t already. If you have started saving for retirement, you also have the option to increase your retirement contributions.
Considerations Before Downsizing
Before you downsize, you have several factors to consider apart from the financial benefits. One of them is to identify how small of a space you’re willing to move into. For example, will you be fine in a studio micro-apartment, or do you still need to have one to two bedrooms? How much storage space do you need for your things?
You’ll also want to look at the amenities in the vicinity of the smaller home you’re eyeing. For example, what recreational activities are accessible within the area? Do you need a smaller home that still has private outdoor space?
It can be a tough decision to move to a smaller home. But if it fits your lifestyle choices, downsizing isn’t such a bad idea given its financial benefits and practicality.