8 Ways Downsizing a Home Will Make You Rich
Benjamin Franklin once said “A penny saved is a penny earned.” But these days, saving pennies isn’t always as easy as it sounds – especially if you’re in a situation where the money coming in is in line with the money going out. Sure, you could manage your budget with a fine-tooth comb and cut out all of your unnecessary expenditures – like the premium cable channels, your morning latte, or the Coach® bag you just need to have.
But, you could also do something a little more drastic that could save more than just pennies; you could save hundreds (even thousands) each year by downsizing from a large home to a smaller one – while still maintaining (or maybe even improving) the lifestyle you’re accustomed to.
Why downsize your house?
Simply put, moving into a smaller home has the potential to lower costs all around. While you don’t have to go quite as small as the 312 square-foot house featured in this article, you can put a significant dent in your monthly bills just by moving from a 3,000 square foot home to a 2,500 square foot home. Let’s look at some downsizing tips, and see how reducing your home size by just 500 square feet can make a big impact on your bank account.
Downsizing Money Saving Tip 1: Cheaper utility bills.
For starters, downsizing is great for the environment and your energy bills. Smaller homes use less energy to heat, cool, and light – and that means you save money. According to a US Energy Information Administration survey, energy usage for the average American home costs around $1.22 per square foot. So, cutting just 500 square feet can result in a savings of $600 a year! Check with your utility company about how much you could save by transferring your utilities to a smaller home.
Downsizing Money Saving Tip 2: Smaller house payments.
In addition to utility savings, downsizing also results in a lower monthly mortgage payment. Depending on how drastic your downsize, you could see a difference of several hundred (or even thousand) dollars each month. But even if your payments are only $50 less a month, that’s a $600 yearly savings!
Bonus tip: A smaller home may also mean paying less for things like property taxes and maintenance costs!
Downsizing Money Saving Tip 3: Choose a place with a low cost of living.
Where you choose to live affects your ability to save money. Whether you’re planning to relocate across town or you’re moving across the country, make sure to choose the location of your new home wisely.
If you’re planning a move to another state, take note of the cost of living of the city(s) you’re considering. If your goal is to pay less for day-to-day expenses, you may be better off moving to an outlying city and commuting for work and play. This cost of living calculator can help you see the cost of living differences in your current city and the cities you’re thinking of moving to.
For example, if you live in Chicago and move to Fayetteville, AR, you’ll notice an immediate difference in the cost of living. You’ll pay around 19% less for groceries, 43% less for housing, and 14% less for healthcare in Fayetteville. So, if you spend $600/month on groceries in Chicago, you’ll spend about $114 less per month in Fayetteville – that’s a savings of $1,368/year.
Downsizing Money Saving Tip 4: Get a better paying job.
If your downsize includes the start of a new job, there’s always the potential for a salary increase. But, keep in mind that the job market is still shaky in some areas. Jobs – specifically well-paying ones – may be few and far between. To determine if the city you’re downsizing to offers higher paying jobs, enter your current city, where you’re moving to, and your current salary into a salary calculator to see how they compare.
Downsizing Money Saving Tip 5: Get rid of stuff.
When downsizing, you may be able to get rid of entire rooms of furniture, knick-knacks, clothes, etc., and an extensive entire home declutter is probably in order. The bottom line is: moving less, costs less. And don’t forget that you may be able to make a little extra money by hosting a garage sale, consigning, or donating the things you won’t have room for in your new home (don’t forget your receipt for tax purposes). On a side note, I made over $600 doing a garage sale after a HUGE declutter – it was well worth the time.
Downsizing Money Saving Tip 6: Move it yourself.
Moving yourself (instead of hiring a full service van line) results in big savings. As an alternative to truck rental, “you pack, we drive” companies are a popular choice for those downsizing homes. You pack and load, and professionals do the driving. And again, you pay less by moving less. These types of services are more convenient than truck rental, and cost less than full-service moving. Compare prices to see where you’ll save the most.
Downsizing Money Saving Tip 7: Organize it without storage.
Take the time to organize your new home. If you can fit everything in the house and garage without paying for a storage unit, you can save an average of $40/month. That’s a yearly savings of $480. Check out these great organizational tips.
Downsizing Money Saving Tip 8: Don’t overstock your home.
A great way to save money long-term is to limit spending – specifically when it comes to buying more than your home can hold. Because smaller homes are normally designed with less storage, you’ll have less room for non-essentials. Lowering frivolous spending is definitely good for the budget.
Are You Ready to Downsize?
If you do the calculations, it doesn’t take long to see that following these downsizing tips could save you upwards of $3,000 a year. That’s a pretty impressive total for downsizing by only 500 square feet. Just think of the possibilities if you downsize the square footage by 1,000+.
What are your reasons for downsizing? Trying to save money? Less house to clean? Getting ready for retirement? We would love to know!