Our ultimate financial goal is to be independent… and sometimes that means you have to truly live below your means. This isn’t always the most fun part of being free financially, but it is one of the best ways to make things come together in a shorter amount of time.
A year ago, George and I had a reality check. We were doing a lot of spending on things that were completely unnecessary, our kids were drowning in toys that they hadn’t played with in years, we had over $50000 in student loan debt and didn’t have anything to show for the “stuff” we had collected. I was in a state of being depressed and honestly, just wanted life to be a little more simple.
That is when we knew it was time to downsize.
Letting go of things and status can be tough, but the end result was well worth it.
Downsizing our Home: This is often the one that hurts the most, for some. We were renting a home that was much larger than one we ended up purchasing– we also qualified for a much larger mortgage than we what we were paying in rent. We decided that even though a larger home would be nice, it was way more than we needed and stuck with something that was going to be affordable for us even if we were forced to live on much less of a income.
It is much easier if you are renting, but if you are in the process of buying a home and see the need to downsize it can be rather embarrassing or frustrating. It’s tough to let go of the status of the larger home in the nicer area of town. However, losing it in bankruptcy, foreclosure or because you can’t continue paying during retirement is much more embarrassing. If your home is significantly larger than what you comfortably need, it is time to evaluate how you can change Sometimes downsizing isn’t about leaving where you live, but about renting out some of your rooms to someone else. If your home is bigger than what your family truly needs to comfortably live in, it’s time to consider:
- Will selling lose you money?
- What equity do you have in your home?
- What are the chances of selling it in the current market?
- If renting, can you find a smaller rental with a significant difference in cost?
Downsizing Our Vehicle: This is one of the easiest ways to downsize for many families. Oh, how I would LOVE a big car that can fit more than just our family comfortably… however, we stuck with something that fits us and our budget.
Society has become dependent on everyone in the home having a vehicle to get them around town. If two parties are working outside the home, then it may not be necessary to have two vehicles. Carpooling in one vehicle can save a ton of money. However, doing so when you work on opposite sides of town doesn’t always work out well. If one parent is a stay at home parent, downsizing to one vehicle can be even more beneficial. Keeping the car that offers the best gas mileage, has the least amount of miles and problems is the smartest choice. Invest the money from selling an older car into paying off the newer one.
- Do you need two cars on a daily basis?
- Is one of your cars paid for and in good condition?
- Would selling put you upside down on payments or make a profit for your budget?
Downsizing our Possessions: We now have a rule. If you haven’t used it, wore it, looked at it in six months: It is time to get rid of it!
We have become a society of collectors. We collect everything from shoes and clothing to books and video games. When you are looking for more money to pay off debt, downsizing your possessions is a great place to begin. This is one area you can easily sell what you own and make quick money to put toward your debts. Hosting a good old fashioned yard sale, or posting to online classified groups is a free and easy way to get rid of items your family doesn’t need. In the process, remind yourself there is no need to add to your collection by buying replacement items.
How do you know when it is time to downgrade?
Do you have a lot of unnecessary room or possessions?
Everyone loves having plenty of space to roam about in their home, but it isn’t always necessary. There are times when you simply have to look at what you have and accept that it is more than you need, and can be downgraded. This can apply to your home, your vehicle and even your material possessions like clothing, tools, toys, and furniture. When you can look at your possessions and honestly be able to say that it is too much, it is definitely a good time to downsize.
Will a downgrade free up money for debt or retirement?
Downgrading your home, but ending up upside down in a mortgage is not useful. However, if you are currently renting and go from a 4 bedroom to a 3 bedroom home and find yourself with several hundred dollars more each month it is a good choice. Ultimately, downsizing is a way to free up income to pay toward existing debt, or to save for the future. Living below your means can help you get out of debt much quicker, and secure your financial freedom for years to come. Consider selling the extra vehicle, moving to a less expensive apartment, or even selling off possessions that are no longer needed or used.
Downsizing is key to paying off debt. If debt is holding you back from finding financial freedom, then knowing what ways to downsize is imperative. By streamlining your life, you open up funds that will help you to pay off debt, save for retirement or simply quit working long hours and begin working for yourself.