How one decision can help you retire faster

This is a guest post by Dee Bauer from SmallHouseLife.com, where she shares information about abundant living in small spaces.

Do you sometimes wonder if you'll ever be financially stable enough to retire? Or maybe it's not so much about retirement as it is about financial independence. Personally, I don't want to wait until I'm in my 60s to enjoy financial freedom and extended leisure time!

As a result of one decision, my husband and I took a giant leap toward our “independence day,” as we like to call it. In sharing our story, maybe you, too, will feel inclined to take this unconventional step toward a brighter financial future.

What did we do? We downsized our home. What's really amazing is that we had just completed building our gorgeous dream home when we made the decision to downsize. Talk about bad timing! And it took us two years to sell because the real estate market had gone south.

Note: It's usually a good idea to live in a home at least two years anyway, so you don't have to pay taxes on the profit. Consult your CPA about this.

Could downsizing be for you? In a world where most people tend to live beyond their means, it's not exactly a popular choice. Here is how my husband and I came to the decision.

1. We discussed what we wanted most in our lives.

The first step is to clearly define what is most important to you. My husband tends to think in terms of how much things cost. I'll bring up an idea, and he'll say, “but that will cost such and such.” To which I inevitably reply, “but, if money was no object, what would we want?”

I believe you can't get to the heart of what's most important in life unless you first remove the barriers. Unfortunately money can be a roadblock if we let it, so I like to remove it while brainstorming. If we had allowed money to be an obstacle, we never would have achieved our goal because we would have said, “We can't afford it.”

So take the time to find out what you want, then try and figure out how to get it.

We put our heads together for several months, trying not to get caught up in the”what ifs” or the “we cant's.” After many heart-to-heart talks, the desire that resonated the loudest for both of us was financial independence.

Oh, great! But how to get there?

2. Once we were clear on our heart's desire, we started planning.

Without a plan, a goal is only a dream or a wish. Here's what we noticed almost immediately: if financial independence had just become our number one priority, then what were we doing with a big, shiny new mortgage? I said, “Sell the house!” But my husband resisted at first. We build houses for a living and he thought it looked better for our business if we lived in an amazing house. There's probably some truth to that, but we had made our decision, so now the focus was how to bring it to fruition.

We talked about it for weeks, mulling over different ideas to achieve our goal. There was always the option to generate extra income, but since extended free time was a close second to our desire for financial independence, neither of us wanted to do that.

Hmmm…now what? We kept circling back to the fact that if we sold our new home and downsized to a more modest house, we could greatly improve our finances and be on a fast track toward early retirement.

3. Implementing the plan and taking action.

Most of our family, neighbors, and friends thought we were crazy. Or at the least, a little weird. I mean who gives up a beautiful new home like that? Especially right after it was built.

But we were ready. We were clear about what we wanted, as well as the course of action to achieve it.

If you think downsizing might be a possibility for you, be sure to also consider all the financial perks it can bring. A smaller mortgage payment (or possibly no mortgage at all) is only one of the many financial benefits. Typically you'll pay less in taxes and insurance, along with less cost for upkeep and maintenance. It can really add up and make quite a difference in your bottom line.

I'd love to hear your thoughts on this. Is downsizing something you'd consider? If so, what would keep you from doing it?

More about...Retirement, Home & Garden

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Jane
Jane
8 years ago

The advice could also be worded differently – stay in your starter home. That is, if you bought a modest starter home to begin with. We bought our current 1,200 sq ft home thinking that we would move in a few years. Well, that was before we considered the fees and stress associated with moving. It was also before we realized how much value our home would “lose”. We bought in 2007, which probably tells you everything you need to know about that. What I didn’t anticipate was how much we would grow to love this so-called starter home, and… Read more »

Marianne
Marianne
8 years ago
Reply to  Jane

Precisely! We too bought a 1200 sq. foot home planning to move after a couple of years but we’ve renovated and love our home. It is all we need and the thought of increasing our expenses and move doesn’t appeal to us anymore. We will eventually move but I think we will stay here another 5 years or so. We won’t be putting on an addition but we do have the opportunity to finish the third floor which would add another couple of bedrooms.

partgypsy
partgypsy
8 years ago
Reply to  Jane

Yeah when we bought our house (a tad under 1500 sq feet) the represenative said it was a great “starter home” and my husband said “I don’t believe in “starter homes”. Still live there, with 2 kids and a dog and cat. The biggest downside is our kids share a room, which might be problematic when we hit pre-teen, teenage years, but everything else I like about it, including a mortgage payment+property taxes that is lower than what people rent for in this area.

K.C.
K.C.
8 years ago
Reply to  Jane

We bought our last home in 1985 at age 32 (approx 1400 sq ft). We paid off the mortgage 4 years later. We added an additional 220 sq ft in 1992 so my wife’s parents could move in with us. We paid cash for the addition. Because we purchased much less house than we could afford and stayed in it, we were able to achieve financial independence at a relatively young age. Our current annual cost to live in the house (property taxes plus insurance) is about $2500. That’s just $210.00 per month. Purchasing a modest house early in our… Read more »

RBR
RBR
8 years ago
Reply to  K.C.

Wow, this is inspirational advice to me (a 23 year old trying to plan out what to do next). Thanks for sharing your story.

KSK
KSK
8 years ago
Reply to  Jane

We, too, remain in our “starter” home over 20 years later. Neither my husband or I ever had grand plans for a huge home. We live in the city in a 900 sf rowhouse. We both have always loved our extremely low overhead. This decision has allowed us to start businesses, and to save the maximum that we can towards retirement. Plus, we’ve been able to travel. Our decision to buy an extremely modest home and stay there has been our best financial decision.

Elaine
Elaine
8 years ago
Reply to  Jane

I like your advice, Jane. We won’t be downsizing but we will be staying in our first home for a long, long time. Before, we had talked about eventually upgrading to a 500k home (which gets you A LOT in Oklahoma), but we’ve recently decided that we can have up to 3 kids in this house comfortably. We will be here for the long haul. With moderate extra payments to the mortgage and some hopeful appreciation, hopefully we can make several hundred thousand whenever we do decide to sell.

Megan
Megan
8 years ago
Reply to  Jane

Jane, I could have written your post! We bought our 900 sf home in 2007, too, and we thought it would be our “first” house. Two kids and two dogs later, we’re still here! It’s a squeeze, but it’s liveable and doable. I think of all the pluses when it comes to my small-to-some home: I don’t feel that I need to cram my house with Stuff, and it’s faster to clean! We live in a great neighborhood, we like that we can walk to a number of places, and I’ve fallen in love with the home itself.

Elyn Tromey
Elyn Tromey
8 years ago
Reply to  Jane

Count me in the start-small-to-begin with camp. My husband bought our 1600 sq ft house in ’99 and we met a year later when I moved in next door. 6 years later, we got married. 12 years later and here we are with 2 children and no plans to ever move. It takes creativity sometimes, but it is easier, sweeter and more affordable to work with the space we have, and to make it work. How the house is laid out also helps. The previous owner rented the house out and wanted to make as much money off of as… Read more »

Jane
Jane
8 years ago
Reply to  Elyn Tromey

That’s another wonderful thing about staying put in your starter home – the personal history that takes place within . I’ve brought two boys home from the hospital to this house, and while my children are still very young, I imagine part of the reason we are doing the addition rather than moving is because of all the sweet memories here even in the five years we’ve been here. Oh, and we have fabulous neighbors. We even rotate houses and all eat at a family’s home once a month. I’m realizing this is unusual. And you can’t really put a… Read more »

Elyn Tromey
Elyn Tromey
8 years ago
Reply to  Jane

Yeah, the location and the neighbors help too! Our yard isn’t so kid-friendly, but we live in a neighborhood that has tons of kids our kids’ age, it has sidewalks for them to bike on, and there is a playground in walking distance. Also in walking distance- the kids’ future elementary school, downtown, and loads of bike paths (so, not only are we saving money living small, we don’t drive much either). I think the small house will force the kids to be outdoors a lot when they are older, and that is a good thing.

tjdebtfree
tjdebtfree
8 years ago
Reply to  Jane

I agree 100%! Bought my house in 2006 – all 725 sq. feet 2 br/1ba and it’s perfect! I have no desire to spend my free time off cleaning house! I will continue to live here til I retire ๐Ÿ™‚

PawPrint
PawPrint
8 years ago
Reply to  Jane

I wish we could have done this. Layoffs prompted moves from one state to another. Moving gets expensive, even when the company is paying for it. Luckily, we always got a mortgage for well below what we could have afforded according to the mortgage lenders.

Dee@ Small House Life
[email protected] Small House Life
8 years ago

Hi Jane..

Staying in your starter home works too!

The one benefit to ‘going astray’ for awhile with the bigger home, is that you might then be able to pay cash for the downsized home with the equity.

On the other hand, staying in a more affordable home from the get go does give you more financial choices along the way.

There’s definitely benefits to both choices!

BTW, have fun with your new addition. Dee ๐Ÿ™‚

A-L
A-L
8 years ago

I left a reply earlier, but apparently gremlins got to it. Anyway, speaking of choices, another thought is to get a house that has flexible living arrangements. We live on the main level of the house (2BR/1BA) and rent out a 2-BR apartment downstairs. Should we need more space over time, we can take over one bedroom, and rent out the rest as a 1-bedroom apartment. Should this become a 3-generation household, we could then take over the entire downstairs apartment. But until then, we’re happy with the space that we have. We do not have to deal with the… Read more »

Small Houses
Small Houses
8 years ago
Reply to  A-L

Love this idea!

In fact we’re in the process of putting together small house plans and one of my ideas is to offer a 2bedroom/1bath with optional detached garage that has a small apt. up top.

It can be used to lease out for additional income.. or a guest house, art studio, B&B, caregiver’s home, the list is endless!

It’s all about thinking just a little outside the box, right? ๐Ÿ™‚

dee

Becka
Becka
8 years ago

Nope, not gonna happen, never gonna happen, no thank you. We live in a 1000sqft house right now and it sucks. It might be tolerable if one room weren’t dedicated to my husband’s music studio, but I still think it wouldn’t be enough. There’s no personal space, nowhere to create an office (which both of us need), and certainly no room for guests. My husband bought this house for himself before we met, before he even considered he might someday be married, and it shows. We will be upgrading in five years or so (once I finish school & start… Read more »

Elizabeth
Elizabeth
8 years ago
Reply to  Becka

I can sympathize with your husband’s decision – it’s hard buying a starter home when you’re single. I’ve resolved not to buy for the husband, kids and dog I don’t have yet. (However, I do aim to buy in a neighbourhood where I could likely rent my condo if I did move in with someone.)

For me, the takeaway from this article is not to buy more house than you need. If you need a bigger house, that’s okay too ๐Ÿ™‚

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Elizabeth

Elizabeth.. You couldn’t have said it better.. Because for us living in a small house is never about doing without.

It’s about choosing what’s most important and then going with it.

And we have to keep in mind, ‘small’ is relative. What I may consider small, someone else may not.

dee

Becka
Becka
8 years ago
Reply to  Elizabeth

Sure, I was just responding to the discussion starter at the end of the article.

I definitely don’t fault my husband for choosing this house. He made a great decision for himself, and it will definitely benefit us financially eventually (it’s likely to sell for a great deal more than the purchase price). But if I could magically transplant us into a house twice its size right now? I’d be right on it.

Elizabeth
Elizabeth
8 years ago
Reply to  Becka

@Becka – I hear you there! I need more space, not less. How much more is the question ๐Ÿ˜‰

Sometimes I feel a little guilty reading articles like this and think I should be downsizing instead, but sometimes that extra space is worth paying for.

Amber
Amber
8 years ago
Reply to  Becka

Yes, those instruments and amp equipment take up tons of space. However, they also keep him sane, so fair trade.

getagrip
getagrip
8 years ago
Reply to  Becka

We bought the first house figuring if worse came to worse we wouldn’t have to move. Had we stayed I would have finished paying it off about four years ago, would have a lot more money in the bank rather than sank into equity, etc. Yet when I really look back I realize I, as well as my wife, were becoming miserable living there and for various reasons itching to get out. The house we currently have fit our needs so much better over the last decade or so. While it hasn’t all been wonderful, I’ve no real regrets. I… Read more »

KittyWrestler
KittyWrestler
8 years ago
Reply to  getagrip

Yep, when you have two kids who need to go to a better school, and all we had was a tiny house with no room for kids and a crappy school and a dangerous road that kids cannot play, the small house concept just doesn’t work.

Julie+in+Houston
Julie+in+Houston
8 years ago

This is crazy perfect timing for me and my fiance (Hi Dan) who are readers of your blog. We jumped into a big home that needed/needs major remodeling and now we’ve decided that we want to sell it and move out into a trailer or double wide on his parents country property until we can save up enough money to build a SMALL house that will be comfortable enough for us and a couple kiddos. It’s funny how our idea came to be and it was after some major brainstorming! Thanks for the push and motivation we need!

partgypsy
partgypsy
8 years ago

I do have to point out that everyone’s passions are different. My husband would LOVE to buy an older, bigger, fixer upper house and fix it up. If an opportunity like that came up and there were no other considerations he would totally jump on that and that would make him happy as a clam. It’s just not about housing. Me otoh, is: we have a functional house with a relatively low balance. It would take a lot for me to move. As it is we are negotiating either a porch bump out or attic remodel (he wants to remodel… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  partgypsy

Gypsy girl.. Absolutely you are right about potential conflicting dreams.

And I’ll tell you a secret. If I had my way, I’d live in a super tiny house and travel 8 months out of the year. OR.. live on a sailboat for a year cruising!

So, I can definitely relate to the art of compromise.. Sounds like you do too. Dee

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago

Hi Julie..

I know! It’s amazing how we can just drift thru life.. not really thinking about what we want.

Plus it’s exciting to brainstorm!

Dee
p.s. so happy you like SmallHouseLife ๐Ÿ™‚

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago

Hello Julie from Houston!

We used to live in Houston before moving to the Texas Hill Country. ๐Ÿ™‚

How exciting to live near parents where the kids can walk to their house. That will be such a gift to the whole family.

dee ๐Ÿ™‚
p.s just noticed I answered twice to your comment. Oh, well, I guess it resonated for me.

Holly
Holly
8 years ago

ITA, there are a lot of benefits to a smaller home if you are flexible about use of space. I can deep clean the entire first floor of my 1,350 house in an hour. Mowing the lawn takes a half hour. I always know what my kids are up to.

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Holly

Hi Holly..

Yep, flexible use of space is key.. We go over that in detail with http://smallhouselife.com/292/5-mistakes-not-to-make-with-small-house-plans

Multi purposing rooms and furniture helps! Plus decluttering.. That’s a biggie.

aib
aib
8 years ago

Learning about space saving and decluttering could be fun. The Oprah show talked about letting stuff go that we don’t need.

Kiernan
Kiernan
8 years ago

I like the concept of this post but it felt a little incomplete to me – I would have liked to hear more the the end results; what your new home is like and what the impact has been on your finances, any adjustments you’ve had to make, etc. I go back and forth on this. I live in a small condo (1000 sq feet) with a small child, and I always wish for more space. But I’m practically mortgage-free which gives incredible flexibility. In my expensive city, even with all the equity I have, I’d have to take on… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Kiernan

Hi Kiernan..

Very perceptive observation, and it’s possible I didn’t elaborate because we are still in the process of downsizing.

What I mean is that we downsized but plan to downsize one more time.

In the short term we reduced our monthly expenses by about $800. per month.

The final downsize we’re hoping to pay cash.

FYI, I think you are very wise to stay put.. and reap the freedom the extra cash gives you.

dee

Jill
Jill
8 years ago
Reply to  Kiernan

I too live in a small condo roughly the same size as yours with a small child too. I always wish for more space and even a yard but I know all the costs associated with that will mean we save less. I’ve resigned myself to the small space and we’re now puting some money into it to make it a better space (like new flooring, better planned out kitchen, smart storage.) The fact that we have a park nearby and a top ranked school just blocks away makes it harder to leave. It’s nice to not have to see… Read more »

Rosa
Rosa
8 years ago
Reply to  Jill

Don’t forget the time commitment, too. Every hour we spend painting/roofing/cleaning gutters/mowing/weeding/trimming trees is an hour we’re not doing fun stuff with our kid.

Tanya
Tanya
8 years ago

This advice is right in line with Warren Buffet’s philosophy. He still lives in his ‘starter home’!

Shalyn
Shalyn
6 years ago
Reply to  Tanya

Yes, but Warren Buffett’s starter home has 5 bedrooms ๐Ÿ˜‰

Carl Lassegue
Carl Lassegue
8 years ago

This is great advice. I’m still stuck at the part where I have to break down barriers and identify what I would want in my life

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Carl Lassegue

“Iโ€™m still stuck at the part where I have to break down barriers and identify what I would want in my life”

I hear you loud and clear Carl.. What helps me is to take the time to commit to paper.. You’ll be amazed what comes forth that you may not even be aware of.

There is one question that you can put anything to the test, and it’s here > http://smallhouselife.com/2190/in-ten-years-will-i-regret-not-doing-it Also, there’s a lively video that gives you one more question to ask yourself when you’re confused.

Dee ๐Ÿ™‚

Brad Moore
Brad Moore
8 years ago

Dee….awesome post! I love the part where you talked about dreaming without the money barrier (i.e. we could never do this or that because we don’t have the money). I am starting to do those types of things with people I work with and it really gets to the heart issues – which may be the most important thing when it comes to managing money. I was basically doing something like that with someone the other day and we uncovered that she wants to spend more time with her children – although she works also. THAT is the type of… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Brad Moore

How encouraging Brad..

Now your client can align her life with her heart’s desire.

BTW, Love your latest post on Wealth Secret. You are spot on!

dee ๐Ÿ™‚

Charlotte
Charlotte
8 years ago

This is a good idea. But everyone’s needs or what they think they need are different. We made the choice about 3 years ago to purchase a single wide mobile home on 3 acres. In our area housing is expensive. This was not our ideal home, but we planned to build a home and land was most important to us. Little did we know had we waited, after the housing market crashed we could have afforded something more. We were unable to build the home we wanted last year, but desparately needed something bigger than a 728 sq feet single… Read more »

DA
DA
8 years ago
Reply to  Charlotte

No offense, but one shouldn’t finance a DEppreciating asset. Trailer’s do not appreciate and thus shouldn’t be financed.

Petunia 100
Petunia 100
8 years ago
Reply to  DA

My site built home has depreciated plenty in the past 4 years. ๐Ÿ˜‰

Charlotte
Charlotte
8 years ago
Reply to  DA

Right, but when we bought our plan was to build a pre-fab home. And this was all we could afford at the time. If we had waited we would have had alot more options. But didn’t know how housing would change and life. We didn’t feel like selling was an option. But two adults, a 3 yr old, and newborn in 728 sq feet, we just couldn’t wait any longer till we saved more for building.

Anne
Anne
8 years ago
Reply to  DA

How is financing a trailer any different than renting? She and her family have to live somewhere.

At least at the end of the process sheโ€™ll have a trailer (or in this case two!) Maybe she can use them as outbuildings for guests or as a study. Maybe she can sell them. Maybe she wonโ€™t make a profit, but I canโ€™t sell the apartments I rented! To me this sounds like a prudent decision.

Charlotte
Charlotte
8 years ago
Reply to  Anne

We do have a buyer for the first trailer…just have to get our refinancing accomplished so it can be released and he can remove it. Our neighbor rents out his trailer near us for only about $180 less than our 1st mortgage. Same size but outside of it much less appealing. We rented prior for close to the cost of our mortgage but dumped lots of money into heating the rental.

DA
DA
8 years ago
Reply to  Anne

One doesn’t finance and pay interest on renting? true?
DA

Dan
Dan
8 years ago
Reply to  DA

That might be a rule of thumb, but it’s not a universally true statement. I don’t care if people pay interest on something if they’ve run the numbers and figured the cost of interest into the purchase price. Put differently, if my car died *tomorrow* I couldn’t pay cash for a decent car. Is financing a new car a sin? After all, it is a depreciating asset. What if I decide the $20 or so in interest I would have to pay on it each month is worth it? OTOH, I could just buy a junker that requires lots of… Read more »

Lisa @ Just here. Just now.
Lisa @ Just here. Just now.
8 years ago

We did this and it was the best decision we ever made. We slashed our square footage in half and moved to a townhouse where the yard work was taken care of for us. We got rid of our mortgage, have less cleaning, and maintenance, we use less utilities and have more savings for the things that are important to us. People thought we were nuts, but we’ve never been happier. I think it’s so important to get away from this idea that bigger is always better. Thanks for sharing!

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago

Hi Lisa.. Hurray for you!

Love your blog.. your truth shines thru.

dee ๐Ÿ™‚

Procrastamom
Procrastamom
8 years ago

We just did the same thing, but we are renters. We were able to boost our saving by $500+ per month, so we will have our downpayment for our home that much faster and are still contributing to our retirement. We are loving the lack of outside work and the much reduced utility bills.

Becky
Becky
8 years ago

I’m not planning to downsize, I already did! If our smaller house were finished, I would loooove it. As it is, none of it’s finished yet, so there are construction zones, it’s hard to keep clean, we’re crowded (living in 700 sq ft, no cafes/restaurants nearby to escape to), and it’s slow only doing work as we earn the money. But, our debt is relatively low compared to a regular mortgage. I am still hopeful that in 5 or 6 years, we will be debt-free and in a mostly-done, small-scale house that we will really enjoy. Thanks for reminding me… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Becky

A family member did exactly what you are doing.. and 20 years later they own $600,000 house free and clear plus multiple investment properties!

Keep up the good work.. ๐Ÿ™‚

Quita
Quita
8 years ago

I purchased my first home on March 21, 2011 as a 24 year old single female. It is a 4 bedroom 2 bathroom 2200 sq foot home and I love it. Everyone kept asking me why I needed so much home. Honestly I saw it and fell in love with the potential. It needs some work but I have plenty of time for that. All renovations will be done in cash as it is available plus a little elbow grease. I am not regretting my decision at this time and I plan to keep it and pay off my 30… Read more »

DA
DA
8 years ago
Reply to  Quita

As does the fertilizer in the yard!
LOL
DA

Paul in cAshburn
Paul in cAshburn
8 years ago
Reply to  DA

Um, dog feces and urine are NOT fertilizer. They are hazardous waste that needs to be bagged and put in your own garbage cans.

Becky
Becky
8 years ago

It *can* be converted to fertilizer using the right composting techniques. I say this as the proud user of a composting toilet. (We live in a rural area.)

And yes, I do realize that DA was making a funny. It made me laugh.

Poor Student
Poor Student
8 years ago

After so much advice I plan to make my first home one which most people would downsize to. Right now I can not imagine moving from the first home I buy. I would like to increase the value of whatever home I do buy and then enjoy the heck out of it. I know I do not need much space to live happily, so I can avoid making the mistake of buying too much house in the future.

Zack Jones
Zack Jones
8 years ago

My wife and I have been in our new house for about 3 years and I wish we could sell it and move in to a cheaper house but we couldn’t get what we owe for our house if we tried to sell it. What we’ve decided to do instead is to pay off all debt and then start paying extra on our house. I figure by the time we pay off our consumer debt we’ll have an extra $2000 per month to put on the house and we’ll have it paid off in 7 years.

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Zack Jones

Zack.. have you considered leasing out your first house so renters can pay off your hefty mortgage.. while you enjoy a smaller mortgage with a smaller house?

dee

Janice
Janice
8 years ago

For me, a resounding “yes!” to downsizing. I’m not a big lover of too much space, I like everything at my fingertips, very organized and efficient. If I have a houseguest 1x a year, that’s a lot, I’m happy to give up my bedroom for a couple of nights–don’t need an extra one just for that. However, other people have different needs and requirements, big extended families/friend network or just love having a house to fix, decorate, enjoy. I like the freedom that not being tied down financially brings, others might find it freeing to have a house they love… Read more »

PFM
PFM
8 years ago

Good timing on the article. We just refinanced our home to a 15 year mortgage but before we did we discussed downsizing. After consideration we decided it was best to stay put for at least 10 years, build equity, then pay cash for our next place and live mortgage free. I admire your courage, I’ve seen too many friends decide they needed the biggest house they can afford, because it’s a status symbol, only to suffer through the financial burden.

Peg
Peg
8 years ago

It’s a great choice, and one we just made this time last year. Sold the 3700 sq. foot house and bought a 2300 sq. foot one. Now, we’re talking about doing it again, but a little more dramatically. The cost of living is quite high where we are, so we’re planning to move to a part of the US where it’s more reasonable and where the real estate market took a huge hit. Won’t look at anything larger than what we currently have-probably even smaller-and we’ll still be saving a LOT of money, even factoring the cost of a cross-country… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Peg

Well.. come on to Texas Peg!

We have absolutely fantastic value in homes..

As an example you can get an 1800 square foot home in good area with tile, granite counter tops, latest appliances, nice backyard for about $200k

dee ๐Ÿ™‚

CFritts
CFritts
8 years ago

I agree with this. I sold a big house, where the property taxes, insurance and cheapest electric bill was $1000 per month and that was before the mortgage. We moved to a 2 bedroom 2 bath condo (rented) for 2 years and then downsized again into a 2 bedroom 1 bath condo (rented). If we bought now the tax write off would not be worth it, so that benefit is gone. And by renting we can move (almost) any time we want. If we need to go smaller we can do that too, each move has chopped hundreds (or in… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  CFritts

Thanks CFritts.. Appreciate your encouragement.

dee ๐Ÿ™‚

getagrip
getagrip
8 years ago
Reply to  CFritts

While not disagreeing that this may be the right move for you and yours, the lowest reasonable rent in my area for a two bedroom one bath apartment is now more than my mortgage on a 2500 sq ft four bedroom and could easily (depending on the area I’d rent in) be more than my mortgage and escrow. To rent anything with three bedrooms I may as well tack in annual and future maintenance costs as well. Just wanted to point out that sometimes regardless of what size home, if you stay put long enough the rents in the area… Read more »

PB
PB
8 years ago

We have a large house — four floors, seven bedrooms, formal dining room, etc. It made sense when we had kids and the whole neighborhood came over after school; makes less sense now. However, we are going to make it even bigger in a few months by adding a sun porch. This is in large part because the back entry is falling off its foundations and needs to be replaced. We are also thinking of our retirement needs, because we love where we are. With this addition, we could easily live on the main floor, rent out the basement apartment,… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  PB

The important thing is you’ve identified what’s important to you and your family.. and determined that your current home is just the ‘right size’ for you.

Sometimes downsizing >> http://smallhouselife.com/2351/is-downsizing-the-right-size-for-you is NOT the right size. Only you can decide!

Dee ๐Ÿ™‚

Paula
Paula
8 years ago
Reply to  PB

PB; Thank you for sharing your situation with us. My husband and I live in a 3000 sq. ft. house that he plans to die in. Some of our friends have downsized but their new homes are not that small. We have four bedrooms; one is a master, one is my office, one is my husband’s escape room and one is a small guest room. We use our whole house but minimally heat the upper floor in winter to save $ on energy bills. Our home also has a formal dining room, large living room, an eat-in kitchen and a… Read more »

PB
PB
8 years ago
Reply to  Paula

Thanks for the kind words, everyone. I sometimes feel rather selfish in such a large place. But as academics, we have an enormous number of books, and that is another factor. Also, we take in students occasionally who are having problems with money/allergies/life, and they help around the house in exchange. I love having enough room for young people, my own and others! And I love my gardens, too! I have a shade garden and a sun garden and lots of fruit trees. They would be hard to leave. In short, in spite of being 59 & 64, we are… Read more »

Nick
Nick
8 years ago

This goes hand in hand with the terrible advice to “buy the biggest house you can afford because you have a larger property increasing in value on borrowed money.” I’ve had some heated discussions over that advice.

In other news, apparently I’m pretty geeky that I have heated discussions over things like this… young Nick would be embarrassed…

Mary
Mary
8 years ago

I think you have to be a homeowner before you realize how big of a money pit they really are. Ours will be paid off soon but then we’ll have to sink major bucks into a great deal of maintenance we’ve been putting off. When the market comes back in our area, we’re hoping to be able to downsize too.

Bella
Bella
8 years ago

So all of the people with these small homes – what do you do in your free time? We are very active people – I guess we’re part of the weekend warrior generation. We work hard and play hard. I hate to call it Stuff since we use it – but we like having space for our motorcycles, snowmobiles, vintage cars, pedal bikes etc. If you asked my husband what he *really* wants. He wants a bigger garage. I love having a basement studio where I can sew, cut glass, and make pottery. We also like having the house that… Read more »

Emily
Emily
8 years ago
Reply to  Bella

I live in an apartment, not a small home, and not having storage space (like, not even attic or basement) is pretty annoying, but we do have parties, we just have a full house! Our other main indoor hobbies are just cooking and playing board games, which don’t require extra rooms. And our outdoor hobbies tend to be things that don’t require a lot of equipment, like running, hiking, and rock climbing. We don’t have a lot of vehicles though, just one car between two of us and one bicycle stored under the stairs. So it’s possible, but might not… Read more »

lucille
lucille
8 years ago
Reply to  Bella

My house is 894 sq ft 1 bed/ 1 bath/ bonus room. Honestly, living in FL, where it’s nice 10-11 months out of the year makes it easier to have a smaller house because you can spend much of your time outside, including doing your hobbies outside and entertaining outside. Many people in my area have outdoor areas which are almost like extra rooms. I love the idea of living like in a campement (I guess the English word would be like a compound). In a family campement there is usually the main house where the family stays, there there… Read more »

Anne
Anne
8 years ago
Reply to  lucille

Your house sounds awesome. Can I move into your camperment?

lucille
lucille
8 years ago
Reply to  Anne

Thanks! It’s pretty great..I think so anyhow. Maybe you can in a few years lol (I’m planning to turn it into a bed and breakfast/ seasonal rental)

Rosa
Rosa
8 years ago
Reply to  Bella

We fit about 8 pedal bikes into the space one car would take up, is what we do (not that our house is small, but our garage is)

But you can get a small house with outbuildings for cheaper than a big house, usually.

Bella
Bella
8 years ago
Reply to  Rosa

Actually you really can’t get a smaller home with outbuildins cheaper than a main house. Unless you’re willing to add in an hour’s commute to get somewhere that land is still cheap, and then you don’t do your hobbies cause your spending an extra 10hrs a week in traffic – YUCK! I know because that would be my husbands perfect setup – a 1200-2000 sq ft home, with an outbuilding for his vehicle hobby, a studio/shop for me, an outdoor firing area – places for guests to stay or just extra hookups for friends motor homes. That camp the first… Read more »

Rosa
Rosa
8 years ago
Reply to  Bella

You’re right, I didn’t figure in the commute – just the price tag. I know lots of people with the little ranch house, 4 pole barns, but they are all an hour out of town.

Becky
Becky
8 years ago
Reply to  Bella

Bella, with our free time, we backpack, kayak, canoe, garden, visit friends, play board games, and host small dinner parties. I prefer having only 1-3 friends over at a time as opposed to large parties. Having a small house makes it easy to keep the guest lists down. We just have people over really often, in order to see everybody we like to socialize with. My husband likes large gatherings, so we hold a big outdoor party once a year when the weather is nice and invite all the neighbors. For storage, we built a small shed for our bikes,… Read more »

Beth
Beth
8 years ago
Reply to  Bella

We have a 1200′ single family home and its HUGE to us. I stay home with my two year old and my husband works full time. We have two dogs and are very minimalist. I actually would love a 600′ house, but at the time we are staying put. In the summer,e we ride bikes, explore local state parks, enjoy farmers markets on the weekend, go shopping, have dinner with friends, go to the beach, explore museums, etc. In the winter, we are home most evenings and I like to cook and read books, and my husband writes music. Generally,… Read more »

ImJuniperNow
ImJuniperNow
8 years ago

I have downsized. I rent part of a relative’s house. I’m saving LOTS of money and I’m miserable. No privacy, can’t have anything of value lying around, watching my rent money go for big screen TVs and not the mortgage. If any readers are responding on their downsizing and decided they made a mistake, I’d love to hear from them. To quote the song – Do I stay or do I go?

Quest
Quest
8 years ago
Reply to  ImJuniperNow

What are the housing prices like in your neighborhood? Have you checked out condo/townhouses/small house prices? How about apartment rentals or renting a small house? Are you employed? How much money do you have in savings? If you have zero privacy and have to watch your belongings, that sounds like hell to me. I don’t know enough about your financial situation to really comment but I would suggest that if you are employed and if you have savings, you might want to find your own small place.

Bella
Bella
8 years ago
Reply to  ImJuniperNow

As soon as you save enough money to make the experience worth it – GO!

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  ImJuniperNow

I recommend getting your plan in order.

What are you saving the money for?

If staying in your situation 6 more months will get you where you want to be, then do that. But if you’ve saved a good chunk and you have what you need, then move!

The reason I love downsizing is because it gives me more resources to enjoy the journey.. if that’s not happening for you, then change it.

dee ๐Ÿ™‚

Richard Rinyai
Richard Rinyai
8 years ago

It’s amazing of how many people are down sizing their homes, but I never thought of down sizing it before I retire.

That really would free up a lot of cash.

Quest
Quest
8 years ago

I have done what you describe. I sold a beautiful custom home that I designed and had built after living in it for 6 years. That was such a difficult decision to make but the economy forced my hand. I then bought a house at foreclosure auction for half its market value where I have lived for the past 3 years. Even though the housing market continues to tank, I hope to always be able to at least sell for what I paid. I will pay off my mortgage balance this year and remain living here for the following 4… Read more »

Tie the Money Knot
Tie the Money Knot
8 years ago

This is a good example of the overall concepts of living within one’s means, and discerning wants from needs. I see many people downsize as they get older, and frankly I think it might make sense to live in a right-sized home before then. Might be easier to adjust to later. Nevertheless, seems like a smart move to consider downsizing to what’s needed. Ultimately, what’s more important: freedom, or working to pay for extra space that’s not truly necessary?

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago

Amen! dee

Trina
Trina
8 years ago

18 months ago we sold our beautiful old craftsman-style 3600 sq ft home and moved into a ranch 1/3 the size. We loved the house, and we could afford the mortgage, but the maintenance was eating us alive. We actually netted a good profit when we sold (yea, Pittsburgh housing market!), and we will be done paying down the mortgage on our smaller home in October. This has given us so much more freedom to make the decisions we want to make. I no longer feel tied to a stressful job just because it pays well. I was able to… Read more »

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Trina

Trina I am SO happy for you!

When we sold our big house, we felt a huge weight off our shoulders, too.

dee ๐Ÿ™‚

Marcy
Marcy
8 years ago

I would love to downsize, but unfortunately my house has lost so much value and my neighborhood has gone downhill so much that I wouldn’t get enough money from the sale of this house to buy anything of any size in a decent neighborhood. So that plan is not always possible.

Dee@ SmallHouses
[email protected] SmallHouses
8 years ago
Reply to  Marcy

Marcy can you lease out the home you live in now so you can move to a more desirable neighborhood?

Mom of five
Mom of five
8 years ago

Count us as another family still in the starter home – sort of. We did put a large addition on, paid for mostly with cash. We added 40k to the mortgage amount and another 1k to the annual taxes. If we’d moved to a home that had everything we wanted (like our addition does), we’d have added at least 100k to the mortgage and a whopping 8k to the annual tax bill. Buying this home and staying put is the smartest financial move we’ve ever made. As the poster above noted, our home’s equity accounts for a small part of… Read more »

frugalportland
frugalportland
8 years ago

I love this — but it’s hardly convincing me that I someday need to buy my own house. Renting is “throwing money away” they say, but there’s so much freedom associated with being a tenant rather than an owner, that I’m not in any rush to increase my debt by purchasing real estate anytime soon.

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  frugalportland

Noooooooo!

You are missing the point with home ownership.. I have made 100’s of thousands of dollars with home equity over the years! and yes, even when the market turns.. we’ve just had to wait it out.

I highly encourage you to explore the benefits of home ownership from a financial perspective.

dee

Jessica
Jessica
8 years ago

Home ownership isn’t for everyone and people are just as likely to lose money on a home as they are to make money on a home. Especially when you take into account taxes, maintenance, money spent on upgrades and inflation. Figure out the difference in cost of renting versus all those costs and invest the difference and a lot of people would be surprised to find out just how poor of an investment a house can be.

Dee@ SmallHouses
[email protected] SmallHouses
8 years ago
Reply to  Jessica

I’m going to have to agree to disagree with you here because my experience is if you buy right (and with good financing) you are more likely to make money than not.

Of course there are always exceptions, but typically I’m talking about.

dee

Laura
Laura
8 years ago

I’d love to downsize. If only someone would buy my damn house!

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago
Reply to  Laura

LOL.. Yeah.. It took us 2 years to sell http://smallhouselife.com/844/downsizing-from-our-big-house and we took $70,000 less for it than we intended.

But now we’re approx. $800. a month lighter with a lot less debt.

dee

Des
Des
8 years ago

We downsized from our starter home a year ago. We had bought the standard 1200 sf 3 bedroom on a postage stamp suburban lot. We only lived there a couple years, when our current house came available as a short sale. It is 784 sf on 3 acres in an area of town we had always wanted to live. When we first moved in, I started to have second thoughts – we had so much stuff! It was nerve-wracking trying to find places for everything, and really trying to pare down. Then I started getting the utility bills…and I haven’t… Read more »

lucille
lucille
8 years ago
Reply to  Des

Your story just shows also that living in a location you love can diminish your need or desire for certain amenities at home. I guess that’s how NYorkers can live in 350sq ft and still love where they live.

lucille
lucille
8 years ago

Just wanted to add that sturdy, efficient, and affordable modular homes might be the way of the future. If not, they should be. How great would it be to easily change the shape, size, and amount of rooms needed? Having kids? Have a mod company come switch and add some stuff for a reasonable price. Everything would be pre-fabricated, so no need to pay costs associated with building. Those same kids moved out? Switch it up again.

Maybe more people would stay put. Perhaps instead of houses we should just all live in weather resistant yurts ๐Ÿ˜€

chacha1
chacha1
8 years ago

As a lifelong renter, I don’t have the angst about starter home or downsizing. Our apartment is nearly 1500 sf counting the secure patio, and that’s more than enough space for us. One thing we’ve learned is we need two bathrooms. It just makes life more pleasant. We don’t, however, need two bedrooms! When we finally buy a property to retire to, we’re going to be pretty well-educated buyers and go with what we NEED. My parents are in an overlarge house in Florida that costs them as much in utilities, tax, and insurance as we pay in rent. Our… Read more »

Anne
Anne
8 years ago

Relatives of mine downsized into a bungalow that cost the same as their larger family home. It was essentially a swap with a few upgrades to the new house.

With so many boomers looking to downsize and move into homes without barriers, it has pushed up the price of smaller homes.

They had to move to a cheaper area in the city since the bungalows in their area were selling for more than their house.

Karen
Karen
8 years ago

What a timely post. We are considering the opposite – upsizing. We bought a 1300 sf fixer-upper โ€˜starter homeโ€™ in 2006 and having moved from a small NYC apartment it seemed like a palace. We put a lot of work into the house, replaced windows, redid the bathroom, built a carport, etc โ€” Iโ€™d say at least $25,000 of improvements. Now we have a baby on the way which prompted us to think about our house differently. My first instinct was to stay in the house and renovate. We priced out an attic remodel, adding a 2nd bath and dormer,… Read more »

John | Married (with Debt)
John | Married (with Debt)
8 years ago

I think the main problem with retirement is people don’t consider downsizing. It is my entire plan.

I hope to put my savings into a tract of land, build a fully off-the-grid house with a garden and animals, and quietly pursue my passions.

Extreme early retirement here I come!

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago

John.. We considered off the grid at one time.

One of my most fun vacations was going to Ukiah CA and visiting the ‘Real Goods’ headquarters. If you aren’t familiar with them, check it out.. You will LOVE looking at all their off the grid and sustainable living options!

dee

a reader
a reader
8 years ago

I’ve been to Real Goods as well, used to be a stockholder in it before Gaiam bought them.

Sam
Sam
8 years ago

This is perfect timing for me! I do want to point out that while the article is focused on downsizing when you own, it can also apply to rentals. That’s the situation we’re in – a lovely home, about 2,000 sf, but I can’t escape the feeling that it is just too big for our family of four. I know some would balk at that notion, but I *hate* having unused space, just seems like a total waste of money. We are now seriously pondering downsizing into a rental of about 1,300 sf, which would shave about $1,000 off our… Read more »

Dee@ SmallHouses
[email protected] SmallHouses
8 years ago
Reply to  Sam

We’d love to have you come visit our site Sam!

So when you move to the rental, are you going to lease out your 2000 sq. ft. house?

dee

Krantcents
Krantcents
8 years ago

We downsized 14 years ago because our children graduated college and moved out. We went from a 5 bedroom house to a townhouse. Our next move will be to a one story condo or house. My mortgae was cut in half and so were the asscoiated expenses.

brooklyn money
brooklyn money
8 years ago

I am about to sign a contract to buy a 750 sq foot condo. To me, it’s pretty big, because it’s bigger than my current apartment. I would love to have a little more storage space and outdoor space, but beyond that it’s enough. I live alone (and love it) so don’t need much more. Of course in NYC i can’t afford any more even if I wanted to have it!

Anne
Anne
8 years ago
Reply to  brooklyn money

Wow, an NYC condo. That’s a real accomplishment.

I’m always jealous of NYers. I love New York.

Dee@ SmallHouseLife
[email protected] SmallHouseLife
8 years ago

Exactly Rosa!

A smaller house takes less time to maintain and hassle with.. dee

babysteps
babysteps
8 years ago

We downsized from a 3,000sf house to 1,300sf last year and are loving it. Almost everything costs less, even utilities (as little as 1/4 of prior expense – smaller home, better insulated, and we relocated to an area where the rates are lower, too). Cable and healthcare are about the only costs that didn’t drop dramatically. Easier to clean, too. We do have a partly “daylight” basement, but most of that is garage or storage or mechanicals so about 200sf in basement is used as living area (not that the assessor counts it, nor would an appraiser). Yes we decluttered… Read more »

SimpleIslandLiving
SimpleIslandLiving
8 years ago

Right now, we are fortunate enough to rent a huge 3 bed 2 bath house (probably 1500 sq ft) for below market value. The problem is that it is my parents, and we want to be financially independent from them. But because the house is so convenient, so cheap, and so spacious, we can’t see ourselves moving. It’s a bit of a catch-22 for us.
I’d love to have our own home, but in Hawaii a small 2 bed 1 bath house will cost $500K. just not money we have right now.

Chip
Chip
8 years ago

I’d love to downsize – but we’re trapped: upside down in our current house. ๐Ÿ™

Dee@ SmallHouses
[email protected] SmallHouses
8 years ago
Reply to  Chip

Chip.. I don’t want to sound like a broken record (as I’ve suggested this to several pp) but what about renting out your current space?

When we first started investing in rentals, we often had homes more expensive than the house we lived in.

If you can make the numbers work, maybe you can rent out your house and then buy a more modest one to live in.

dee

Laura
Laura
8 years ago

Two years ago, we bought a 1200 sq. ft. Cape, which was all we could afford (actually more than we could easily afford, despite the Recession bringing down prices). Partly it was my husband’s dream to own his own home, but mostly it was because we discovered the hard way that when you rent somebody else’s property, they can evict you on a whim (in our case, after 16 years of being model tenants because landlady decided to sell and wanted both apartments empty when she showed the place) or can come in whenever they want with the usual notice,… Read more »

chris
chris
8 years ago

I always thought the idea of a “starter home” was dumb. Buy a nice home you enjoy, pay it off and be done with the whole thing. Our home is 1800 sq ft (450 of that being a two-car garage which was converted years ago). There is more than enough room for four people and three dogs, it is paid off and our expenses are modest. I just don’t “get” the idea that some folks have of constantly looking to the next bigger and better thing. With that mindset, they will never be able to enjoy what is right in… Read more »

lucille
lucille
8 years ago
Reply to  chris

I can understand the appeal and the function of buying a starter property. There are lots of “non-dumb” reasons. Not all people who buy a starter home are looking to ladder climb to a huge house. Maybe someone who is willing to live in a certain house or neighborhood that will build equity while they save for a more desireable house would prefer to go ahead and buy now rather than rent while they save. Maybe someone who would like to eventually be a landlord and own several rental properties wants to live in their future rental until they can… Read more »

Christa
Christa
8 years ago

I love our 1500 square foot home. I think it’s the perfect size, and I don’t ever plan to move unless we downsize as seniors.

Ms Life
Ms Life
8 years ago

It is interesting that Americans are starting to move to smaller houses. Zambians (where I come from) started building bigger and bigger houses a few years ago. We seem to be out to outshine our neighbours’ mansions and end up with houses that are without form. It is a shame, really.

retirebyforty
retirebyforty
8 years ago

We already downsized to a 1,000 sq ft condo.
It’s not cheap because of HOA, but we have a lot more time and we like the location better.

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