Could Downsizing Help Your Finances?

by Miranda Marquit · 10 comments

simple office
One of the things I noticed as I went through two cross-country moves in the space of a year was that downsizing ended up being a big help to my finances. When you have less stuff, there’s less to worry about, and less to take care of. Plus, you don’t need a bigger place to keep all your things.

Here are some of the ways downsizing can help your finances in big and small ways:

Downsize Your Home

Moving into a smaller place can reduce your overall expenses. Not only is your base cost lower, but you probably also pay less in utility costs. If you sell a bigger house and buy a smaller house, you end up saving on property taxes too. And, depending on your market, you could actually come out ahead if you sell a bigger house and then rent a smaller place.

With renting, you don’t have to worry about property taxes, maintenance, repairs, and some of the other expenses that come with buying a home. Figure out what lifestyle works for you, and decide what might make the most sense.

Get Rid of a Car

How many cars do you have? How many do you actually need? If you can get away with selling a car, you might end up in better financial shape. You can take public transit, which might be cheaper than paying for gas. Plus, you don’t have to worry about paying for insurance, maintenance, and repairs.

Even if you think you need multiple cars, you might be able to “downsize” by selling or trading in an expensive car for a less expensive car. The savings could be bigger than you think. I will probably add a car to my name in the next year or so, as my son learns to drive. However, I’m hoping to buy a cheap clunker with cash. No expensive car for him.

Sell Some of Your Stuff

I’ve always resisted getting a storage unit for my things. I just don’t want to deal with paying a fee each month to store things I don’t look at. I also discovered that I could get a little extra cash by selling the stuff I didn’t want to drag across the country with me. Now, because I don’t want to build up the clutter again, I am more careful about what I buy. I think through each purchase before I make it. I don’t want to fill my home with things, and thinking about how clean and open my space currently feels helps me from adding too much to my establishment.

Downsize in Other Ways

Look for other ways to downsize your life. This can include getting rid of cable/satellite TV, subscriptions, and other monthly costs that you don’t use very often. You can also benefit from meal planning. You can save money on food if you don’t eat out as much. You can even downsize your vacations by taking smaller vacations and staycations to save money. I’ve found that a few inexpensive camping trips during the summer provide more memories and cost less than going on a huge trip each year.

Those are just how I save by downsizing. What are some ways you plan to downsize your life to save money?

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{ 10 comments… read them below or add one }

DJ @ MoneyGoody September 6, 2016 at 6:37 am

I recently moved into a city-area where I don’t really need a car so I got rid of mine. Not having to make payments or pay for gas and maintenance freed up so much extra money. So I’m all for downsizing when you can!

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David Ning September 6, 2016 at 9:21 am

I was in Taiwan and Hong Kong recently, and I really thought about how much money I could’ve saved if we didn’t have the two cars that we have. The cost of the car, gas, insurance, maintenance, car washes can add up to a huge sum. Controlling car expenses alone in one’s lifetime can likely make up most people’s retirement finances.

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Ryan G September 14, 2016 at 12:38 am

I figure that the cost of owning and maintaining a fairly new, economy vehicle is about $500/month. The way I’m figuring this is by taking a car that costs ~$25K new, then buying this car as a 2-3 year old used car, then owning it for ~3 years. You still take a good hit on depreciation, but the first owner took the brunt of it. I figure that you will lose $200-$250/month in depreciation, plus it will cost $100-$150/month to insure. Then, while the car is still fairly new, over the course of 3 years I figure about $100/month for maintenance. This covers the cost of routine maintenance, and figures you’ll have to put new tires on the car at some point while you own it.

When you really look at it, the cost of owning a vehicle is significant. What could you do with an extra $500/month in your budget? Of course, there are ways to reduce these costs… You can keep the vehicle longer and reduce your losses to depreciation, or you can buy older vehicles (5+ years) that have taken the majority of their depreciation losses already. However, you will face increased, and generally more uncertain, maintenance costs.

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David Ning September 14, 2016 at 8:56 am

I’m starting to realize that pretty much everyone can retire rich if they can just control their housing and car expense. You are doing well by thinking about the potential cost before purchase.

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Caroline September 6, 2016 at 10:34 am

People are shocked that we’re a one-car (and no kids) family, even though I live 30 seconds from work and it would be ridiculous to have another (the car we have is enough of an attention seeker – I couldn’t be doing with another). We also only want a two bedroom house (no plans for kids), but here in the UK they’re rarer than hens teeth, and the price of a three-bed is unattainable for us atm.

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David Ning September 6, 2016 at 2:07 pm

What are you doing paying for a spare bedroom?!?!???!? Just kidding :)

You are doing the right thing by just paying for what you need. Your future self will thank you later!

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Action Economics September 6, 2016 at 3:10 pm

My parents downsized their house a couple years ago, they ended up getting a fairly nice house that was around half the price of the place they had been in. It’s amazing how much a change like this cuts both property taxes and home owners insurance, especially when preparing to live an FI lifestyle.

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David Ning September 6, 2016 at 9:33 pm

And let’s not forget about utility cost and the time it takes to clean! Downsizing is a really great move.

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Brad, Financial Coach September 8, 2016 at 8:55 am

We downsized our home two years ago and have no regrets at all! Moved into about half the size and was able to pay cash from the equity we had in the bigger place – WIN, WIN!! :)

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David Ning September 8, 2016 at 6:46 pm

Wow awesome! Being debt free must feel really nice!

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