Q: I always thought that when we bought our ideal home, we’d live in it until we died. It seems to me that most people will eventually get their home paid off so they can live in it mortgage-free when they retire. My husband and I both work full-time and really appreciate our home.
But lately, I’ve heard some of the financial experts on television talking about down-sizing your home. I can’t believe I’d ever consider it. But ever since the bottom fell out of the economy, I’m starting to wonder about all the costs involved — should my husband and I think about selling our house?
Does giving up the home of your dreams and down-sizing ever make sense?
A: You pose a good question. Many people believe like you: that they’ll remain all their lives in the first home they buy. However, we know that usually isn’t the case as the average adult moves nearly 12 times in his life, according to the research. And usually, each time people move they “move up” to homes that are bigger and cost more to buy and maintain.
The reality is that it costs money to keep a home in good working order. Some situations in life could occur that would compel you to reduce your standard of living. If you or your spouse got laid off, for example, it would require you to live on just one of your salaries.
So the question is would that be do-able? If the layoff lasted longer than you were prepared for, there might come a day when the topic of down-sizing and selling your house to reduce living expenses would be discussed.
Another reason to down-size has to do with how much money you save over the long haul. If you turn 65 and your retirement savings haven’t reached an amount you can live on for 25+ years, it makes sense to reduce your standard of living. That will most likely involve down-sizing and selling the home you live in for a smaller one.
Let’s say you live in a 2,500 square foot home at age 65. If the kids have moved out, you could reduce your monthly expenses by a large percentage if you moved to a 1,200 square foot condo. That’s because you’d be paying for heating, cooling and upkeep on just ½ the square footage that you did before – plus, no lawn care required!
Another factor that could trigger down-sizing is one of you leaving the workforce early. Consider this — if you or your husband develops a chronic health condition that prevents you from working, you’d be living on one paycheck or on a significantly lower Social Security income rather than the amount on your paycheck.
Another situation that might cause one of you to resign your job earlier than you anticipate is the need to take care of an aging parent.
The good news is that it’s less expensive to run a smaller home. You’ll begin noticing savings right away. The smaller your yard is, the less you pay to mow it or have it mowed. The smaller your roof is, the fewer dollars you spend re-roofing it.
So there are specific reasons that might trigger thoughts of selling your home and down-sizing. Be open-minded when reviewing any changes in your financial situation and be flexible enough to make the necessary changes.
If an unexpected financial situation arises, always consider all your alternatives.