Shoestring Living: The downsizing decision

Molly Logan Anderson

We’ve all been faced with tough decisions in life, and I’d venture to say that whether or not to downsize your home to save your finances is one of the hardest. A few years ago, sensing future economic changes, my husband and I moved a bit farther from the big city. In doing so, we were able to lower our mortgage substantially, while still building a new home that was the same size as our old one. As much as we hated to move, the timing was perfect with our oldest just starting school. In our case, it was a difficult but great decision.

Sometimes the financial picture is much more complicated. Your home might be worth much less than you paid for it. Time may be of the essence because you’re not able to pay your mortgage. Your consumer debt might be eating you alive. While every situation is unique and decisions like this should be discussed with your financial adviser, consider the following benefits of downsizing.

Smaller mortgage = bigger opportunity

Of course downsizing can result in a smaller mortgage. But when you think about the fact that most of us spend 30 percent of our gross income on our mortgage, lowering our biggest monthly bill has a huge impact. Think of the money you’ll be able to put toward debt, save or spend that you don’t have right now. The bottom line is that financial freedom becomes more of a reality if your mortgage grows smaller. 

Everything else goes down, too

Just as the mortgage lowers, you’ll find most other bills associated with your smaller home will decrease as well. Utilities, maintenance costs and property taxes are just a few places where you’ll likely save. And if you plan your new location in terms of its vicinity to places you frequent, you may save money on things like gas and groceries, too.

Peace of mind

In a 2004 survey by the American Psychological Association, 73 percent of Americans listed money as the No. 1 factor that affects their stress levels. I think more than anything else, the most notable result of downsizing is the peace of mind achieved with lowering financial stress. While moving is a stressful event in and of itself, it is only a temporary one. When faced with the downsizing dilemma, remember that your family really can create a home out of any house as long as you’re together. Making tough but sound financial decisions will have a positive effect on you and those you love for a lifetime. 

Molly Logan Anderson is a freelance writer who lives in the western suburbs of Chicago with her husband, Mike, three kids and black lab. Join Molly on her family’s journey of living a frugal life and making financial freedom their reality.