The term “less is more” can be used in a variety of settings. If you want to lose weight, don’t eat that last piece of cake. If you want to clean out your closet, don’t buy that new pair of shoes. If you want to take control of your financial future, don’t buy that huge house.
If you are at a crossroads in life – whether you are an empty nester, recently retired, or simply looking for a fresh start – this may be a good time to consider downsizing your home. Here are five reasons why.
1) Pay off your mortgage
According to Dave Ramsay, buying a smaller home can make sense when trying to eliminating mortgage payments.
With the profits from selling your bigger house, you may be able to completely pay cash for your new home. But even if you have to get a small mortgage, you’ve succeeded in reducing your debt. Now your goal is to get rid of that debt as quickly as possible. The smaller the balance, the quicker you can make it happen.
– Dave Ramsay (daveramsay.com)
2) Go debt-free
Once you make a dent in what you are paying on a mortgage, you can think about diminishing other debts, like student loan payments and medical bills.
According to Chris Hogan, downsizing will help you permanently kick debt to the curb.
If you have the average student loan debt of a recent college graduate, that means you owe around $37,000.With a 6% interest rate and a minimum monthly payment of $250, you’ll be carrying the burden of that loan for 22 years. That’s a long time!
Now, if you downsized your home, cut your monthly mortgage payment by $300, and added that $300 to your monthly student loan payment, you’d say goodbye to Sallie Mae in just under seven years. On top of that—you’d be saving over $22,000 in interest!
– Chris Hogan (chrishogan360.com)
3) Save for retirement
We’ve gone over how downsizing can save you money on your mortgage, which will help you pay off debt, but what do you do with all that extra cash?
According to experts, you should be investing 15 percent of your household income towards a retirement fund. Saving up for your future can mean financial security, which means more money going towards things you love.
4) Reduce maintenance
Less space can be a good thing when it comes to maintaining a home. If you downsize, you are spending less time and money on everyday chores. On top of that, you will see a drop in utility bills, insurance and property taxes. Downsizing also means less cleaning, and what’s not to love about that?
5) Live simply
Downsizing undoubtedly has its financial benefits, but what about the benefit for your mental health? Once you free yourself from excessive debt, excessive maintenance and excessive items you inevitably hoarded in your larger house, you can focus on what really matters to you.
As is the case with all of our possessions, the more we own, the more they own us. And the more stuff we own, the more mental energy is held hostage by them. The same is absolutely true with our largest, most valuable asset. Buy small and free your mind.
Downsizing is a very personal decision that isn’t right for everyone, but if you believe that making the move to a smaller home could be a good fit for you, our McGrew agents are here to guide you through the process.