4 Financial Upsides of Downsizing (And 5 Lifestyle Benefits)

Living large is as American as apple pie, so downsizing might not seem the most traditional lifestyle choice, but it’s been catching steam lately. It comes with countless perks, including financial and lifestyle-related benefits, so getting on the downsizing bandwagon might be worth considering.

For starters, the savings you can pocket from switching to smaller living are not negligible. Nationally, the proceeds from trading a 4-bedroom for a 2-bedroom home range around $196K, taking into account prices, closing costs and 10-year property taxes. Savings can be much higher if you’re making the move in one of the country’s most expensive markets. In San Jose, downsizing can result in savings of around $777,000 per move.

Let’s take a closer look at the most notable financial benefits you can count on if you’re taking the smaller living route.

Live in a cheaper house

This is probably the most obvious perk, but it’s worth stating: When you downsize, getting a smaller home will cost you less, translating to lower monthly payments and less interest paid over time if you’re going for a mortgage. If you are able to pay for it with cash, you’ll basically be mortgage-free henceforth.

Increase your cash flow

Selling your current, larger home and going for a smaller one allows you to tap into your  home equity. You can use this in various ways to help yourself going forward:

• Reduce your debt

Whether you’re looking to pay off  the new home or your student loans, that extra cushion of cash can help alleviate some of the debt you might have incurred over time.

• Make an investment

If you’ve paid off your new home and you find yourself having a bit of extra cash, you could invest in a property portfolio. Real estate is a well-known source of passive income – rent out that extra property and wait for the income to come in! A new car or another essential possession are other ways to use your extra funds.

• Contribute to your retirement fund

If you’re debt-free, use some of the equity to invest in your future. Go for Roth IRAs and pretax retirement plans to help build an additional financial cushion for when you leave the workforce. Even small yet consistent dividends can make a huge difference over time!

• Offer financial support to your children

If you’re a parent to mature children, you could use some of the savings resulting from downsizing your home to lend your kids a helping hand. It could be a down payment for their new home — in today’s competitive market, they are sure to appreciate the help!

Reduce your taxes

As homes are taxed based on their value, you’ll qualify for different taxes if you downsize. Your smaller home is likely to cost less, which means you’ll pay less in property taxes. You can use the extra cash however you see fit.

Cut down on utility and maintenance costs

With a smaller home come reduced utility bills. There’s less room to heat during the winter and cool during the summer. That translates to lower electric, gas and water bills. You might still have the occasional maintenance expenses, but with less square footage, there’s less to fix. Moreover, if you have a smaller yard, landscaping will also cost less.

Besides the numerous financial benefits, downsizing also comes with a slew of potential lifestyle perks.

Find the ideal space for you

Think of your new home as a blank slate that allows you to start over and create the ideal living space for you. Keep the possessions that represent you and dispose of the rest – toss or donate them. Keep your new space breezy and airy to make the most of your new life. To help you do that you can keep seasonal and bulky items away from home instead of having them clutter it up – or worse, have them get damaged if you keep them in an area of the home that’s not air conditioned. That can harm sensitive items if you live in a hot and humid climate such as the South. If, for instance, you live in Space City, renting a Houston self storage unit to keep sports items and clothing is a great way to protect them when you’re not using them.

Reduce cleaning time

For most people, cleaning is an unwelcome chore. And the bigger the house, the longer this task takes. When you move to a smaller home, you get the unexpected perk of less cleaning time because there’s less space to tend to. This leaves you extra time to do activities that you like and to enjoy life more.

Embrace a more minimalist lifestyle

Cutting down on living space is a great way to embrace a more minimalist lifestyle. With less space to keep stuff in, you’re less likely to buy it. This will help you change your shopping habits from food and clothing to various household items.

Enjoy more family quality time

This is an unexpected perk, but it makes sense. When you live in a smaller home, it’s easier to congregate in the common areas and spend more quality time together as a family as opposed to living in a larger space which naturally makes people spend time alone.

Spend more time in your forever home

If you’re downsizing prior to your retirement years, you’re much more likely to live in your new home when you reach that time. It will mean you’re less likely to move later in life so you can comfortably live in your forever home and grow old here.

Essentially, living smaller will get you access to a more relaxed lifestyle, with less financial burdens, and will help you be more focused on life experiences.