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?