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Most folks think about moving because they want more space to accommodate their growing lifestyle. But have you ever thought about the big-time benefits that would come with downsizing your home?
Imagine having more money to enjoy guilt-free vacations with your family and date nights with your spouse—all while saving for retirement. You might think you need a huge income to make that possible, but changing your life for the better might be as simple as rethinking the roof over your head.
Let’s look at an example of how one family made big changes with a smaller home.
Roomy Quarters Leave No Margin
Luke and Hannah own a four-bedroom home they bought nine years ago when their two kids were young. At 3,000 square feet, they’ve got plenty of room for the kids and all their friends to hang out.
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Unfortunately, everything else in their life feels cramped.
Even though Luke and Hannah work hard to provide for the family, they never seem to have the money to do fun things outside of the house. With a $60,000 household income, their $1,375 mortgage payment takes up nearly a third of their paycheck each month. They have enough to cover the bills each month, but that’s it.
They need to start saving for retirement but are making slow progress on their car loan—the last remaining bill in their debt snowball. Once it’s paid off, they’re looking at an additional two years to build their emergency fund before they’re ready to invest for retirement. At 43 years of age, they don’t want to delay saving for retirement much longer.
Of course, money’s not the only issue. Time’s also in short supply. Luke and Hannah would love to kick back and relax on the weekends after a hard week at work, but that’s a luxury they simply can’t afford. If they’re not cleaning house, they’re doing yard work. Every weekend feels like a mad rush to Monday. It’s exhausting!
It won’t be long before their two kids—ages 11 and 13—leave the nest. Luke and Hannah want to make the most of the time they have left together under the same roof. The couple decides it’s time to trade all their space for the life they really want.
From Barely Paying Bills to Baby Step 4
Sizing down from 3,000 square feet feels intimidating at first. But Luke and Hannah realize their guest room goes unused most of the time anyway, and their formal living room is just another big space to furnish. That’s two rooms of furniture they can sell once their home is sold (cha-ching!). They donate anything that hasn’t seen the light of day in the past nine years to charity.
With their home newly decluttered, Luke and Hannah work with a real estate agent to get it sold. After a month on the market, they accept an offer for $269,000. With just $165,000 left on their mortgage, they bank $104,000 off the sale.
That chunk of cash catapults them forward to Baby Step 4, eliminating debt and setting them up with a solid emergency fund. To celebrate this major money milestone, they use some of the proceeds from their home sale to splurge on a much-needed family vacation.
They also have plenty of cash left to put a sizeable down payment on a smaller home and cover any closing costs.
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Living Larger in Less Space
Now that Luke and Hannah’s home is sold, it’s time to find a new place to live! Their agent helps them land a great deal on a three-bedroom home with 1,700 square feet for $162,000.
They put $60,000 down on a 15-year mortgage at 3%, bringing their monthly mortgage to just $900. With their debt snowball complete and a lower mortgage payment, that gives them a total savings of $1,000 a month.
That kind of extra cash makes saving 15% of their income for retirement much easier. If Luke and Hannah contribute $750 a month toward retirement for the next 22 years, they could retire with over $700,000 in their nest egg. Even better, a 15-year mortgage means they can look toward retirement with more confidence knowing their home will be paid off before they even turn 60.
It doesn’t take long to start seeing the benefits of a simpler life. With less space (and stuff) to clean and a smaller yard to maintain, they can spend more time hanging out as a family. And now they actually have enough cash to fit fun into their budget! Luke and Hannah enjoy date nights at least once a month and save a portion of their fun money for annual family vacations. If they want to set some aside in a college fund, there’s room for that too.
Find Out If Downsizing Could Benefit You
Trading their oversized home for a smaller one worked great for Luke and Hannah. But what about you?
If you’re curious about whether downsizing could change your life for the better, ask a real estate agent you trust to show you how much your home is worth in today’s market. That way you can decide what’s best for you and your budget.
Look for someone who puts service before sales—but knows how to get things done when it’s time to sell. Want the best of the best in your area? We can connect you to a real estate agent Dave recommends.