This is the first in a series of articles by CommunityAmerica Credit Union. The series will tackle personal debt by planting the seeds of savings and making smart downsizing choices. For some, this may be a way to get started on a positive foot. For others, it’s a chance to start over after years of overspending. Regardless of your reason, we’ll help you navigate how to downsize realistically.
The “things” we own in our home are engrained into our daily lives. That’s why, for many, downsizing is an emotionally tumultuous ride. You may be retiring and physically need to downsize, or unburying from debt. Regardless, parting with the familiar is understandably challenging. Let’s begin with the most difficult of all downsizing tasks – your home.
The market is hot for selling, so if you’re considering downsizing, now is a fantastic time to act. Trading a 4,000 square foot house for a ranch or rental may seem like a huge downgrade rather than downsize. However, it does wonders for a budget on life support. Keep in mind when homes are selling at full value, you will have to buy at full value.
Meet with your realtor to review what your cost savings will look like based on your equity and future budget. Even small spaces in a highly desirable area are sometimes incredibly costly, so you need to strike a careful balance. What area do you want to be in and how much space do you actually need to be comfortable?
What Stays, What Goes?
It’s very simple in theory. If you have less space, you need less stuff. Start by taking an inventory of items in every room. Ask yourself if you love the item, or if it has some kind of personal meaning to you. If not, it’s just taking up space. The best part is you can transition some of these unused items into money. Neighborhood swap and shops are always a good “first pass” to sell items second-hand. Be prepared to part with your items for about 75 percent off the original value. While that’s tough, it’s cash in hand now to support your financial goals. Garage sales are always a next option for getting the immediate cash benefit. Now is a great time of year to tag onto a neighborhood sale.
If those options don’t move your items, create careful records of each donation. Include a monetary value for each, and drop them off at a 501(c)(3) of your choice. This will give you a bump during tax time. Just be sure to snag a receipt for your donation.
Transitioning a Family
Downsizing is often a cleansing process for empty nesters or retirees. It may not come so easy for families who need to recover financially, but still have young children at home. While it’s more of a challenge, there are many retailers who specialize in small space solutions. There are also a plethora of minimalist ideas to skim online. Products like expandable tables and shelf racks, tuck in nesting stools or loft conversion bed sets work wonders. Keep an open mind, research smart solutions and create a floor plan utilizing square feet that you actually need. This will help you determine a size and layout of interest when you are ready to house hunt.
Once you start living a more realistic lifestyle, you may find that you actually enjoy your new freedoms. Just be sure to use your financial savings wisely and invest in a debt-free, cash-forward lifestyle. It may not happen immediately and it may be something you have to work towards. But it will be worth it in the end, as a home downsize is a major leap forward into a financially healthy lifestyle.
Up next: How do you simplify your social calendar without creating relationship rifts? We’ll break down how to spend time with friends and loved ones while prioritizing financial goals.
For more advice on getting ready to buy or sell a home, visit https://www.communityamerica.com/mortgages.
The blog and its opinions are expressly that of its author and does not convey the opinions or strategies of the Credit Union and should not be considered financial advice. CommunityAmerica’s Mortgage offers are subject to credit approval and terms may vary based on conditions.