Last year was the best year for existing home sales in 11 years. That's quite an enticement for many homeowners to put their house on the market and downsize. It sounds like a smart move, but is it?
Once you get older and your children are no longer living at home, downsizing may sound appealing. Doing so could help simplify your life, reduce expenses, and possibly allow you to set more money aside for retirement. But before you make the move, you need to understand the pluses and minuses of downsizing for your particular situation.
Moving to something smaller can definitely lead to a simpler lifestyle. And simple is good, right? Lowering your overall spending can also enhance your sense of financial security after retirement. Here are some other potential pluses:
- Lower or no monthly mortgage payment
- Reduced maintenance and upkeep
- Decreased utility costs
- Increased retirement stability due to expense reductions
Along with the quantifiable upside to downsizing, a reduction in stress will be inevitable if you are able to get better organized and toss items that you no longer want or need when moving to your new home.
There's Always a Downside
One common misconception is that downsizing means you'll have extra cash in the bank after you sell your larger home and purchase a smaller one. While this sounds logical, it isn't necessarily true. The cost of a smaller, newer house, featuring the latest amenities, often will cost more than you’ll receive from the sale of your existing home.
Setting a Budget Is Key
Put together a comprehensive budget for the sale, purchase, and move. You'll also want to include any anticipated expenses after you're settled in your new home. This will be key for enhancing your financial security now, and in the future.
If you've made a good move and have actually reduced expenses by downsizing, make sure you put aside an appropriate amount for future necessities before spending it on little extras or vast luxuries.
As with all major decisions, there's more to downsizing than the financial impact. The emotional, social, and physical well-being of you and your family is also important to consider. If downsizing is in your future, be sure to consider the pros and cons before getting serious about your move. If this could be your last move, make sure it's a good one!