IF YOU ARE A SENIOR OR BABY BOOMER CONSIDERING A CHANGE, READ ON.
Many of us who are approaching “Senior”, “Mature” or “Baby Boomer” Status (or, like me, have arrived) feel the economic squeeze to some extent and are looking to cut costs. Or, perhaps, it’s time to just cut those costs in order to enjoy life a little more. There’s more than one way to reduce housing costs. But the most effective way is to downsize. That means selling your big old homestead and buying something smaller.
Downsizing could mean moving from a 12,000-square-foot mansion to a 2,000-square-foot single family home, or from a 2,000-square foot home to a Townhouse or Condo. Maybe it is time to move to a Mature or Adult Community where you can find neighbors with the same interests.
Whatever you decide, it’s a big change… in lifestyle and in cash outflow.
It isn’t all about the money. Sometimes it is, sure. But sometimes it’s a combination of factors that lead us to our decision. Here are 10 questions to ask yourself before sizing down.
First and foremost: Why?
As a cost-cutting measure, downsizing makes perfect sense. A smaller home typically means a smaller mortgage. If you have no mortgage at all, it can mean a nest egg in the bank. Many of us lost a significant part of our retirement investments during these hard times. You might be in a position here to replace some of those savings. Downsizing also means lower utility bills and, possibly, reduced maintenance costs (more about this later).
Certainly finances are one of the biggest downsizing drives, but there are others. Lots of Boomers and empty-nesters find their house is kind of cavernous. The kids have moved out and while it was fun to have the extra rooms repurposed (den, sewing room, craft room), you realize you didn’t really need all the extra space. Retirees may find that vacuuming 10 rooms of carpet is a waste of time and energy.
If any of these scenarios fit you, you may be in a good position to downsize. But before you make your mind up, take an honest look at yourself, your family and your life: What do you want? What do you need?
What do I really want?
Space can be a wonderful thing. It means having room to spread out, the ability to store furniture with purely sentimental value (my husband calls this junk). It can mean having a big roomy garage to store lawn equipment, tools and those golf clubs (that’s my husband’s stuff. I think it’s junk). It can mean everyone watching his or her favorite show at the same time. It means quiet time in a room you can call your own. This all reminds me of when we were kids and had KEEP OUT signs on our doors.
Do you need these things? That depends. How many rooms do you really need to relax? Do you really need all this stuff? Do you even know what’s in the attic or in the basement? When we reach Senior or Baby Boomer status, you realize that maybe the rest of your life shouldn’t revolve around “stuff”.
Be honest: If you’re going to spend the rest of your life regretting parting with the furniture your Mom had, or your kids had, well then keeping it might actually be worth heating the extra square footage. But let me put this thought in your head: Why not let the next generation have some of this furniture?
With that being said, getting rid of the furniture you don’t use and saving every month on your power and mortgage bills might free up the cash you need to put in those new kitchen cabinets you’ve been wanting.
Which brings us to the next question: Will you really be spending enough time at home to enjoy all the stuff and all the space every day? In other words: What lifestyle do you see for yourself?
How do I want to Live?
Trading space and stuff for an easier lifestyle is a sign that you are moving on. Perhaps you’ve spent 30 years going to work every day, shuttling the kids to school and activities, running errands for everyone else. Now you’re slowing down and enjoying being at home. That could be reason enough to stay in your larger home. Or it could be reason enough to downsize. It all depends on the lifestyle you want to lead.
Do you want to be eating out more, travel more, putter in the garden rather than lawn maintenance? Drive around and see all the sights you’ve always meant to see and never got around to it?
On the other hand, is major gardening a huge part of your life? Do you spend your weekends antiquing and then selling off the older purchases for newer ones? In that case, having lots of outdoor and indoor space could be a significant factor in your lifestyle. Giving that up may affect your life in a negative way.
Maybe by now you are nodding and giving a little more thought to downsizing. Ask this next question:
What Can I Give Up?
This is the tough one. Our belongings are part of our identity. Not just in the sense of material value, but our ‘things’ are our bridge to the past. Family heirlooms and the kids’ craft projects can hold a lot of value to some people.
So, what can you REALLY part with? If the answer is “A LOT” go ahead and start sorting. It’s a difficult and emotional process, but maybe it’s time for you to move on and live more simply.
How Will This Affect My Bills?
How much you’ll actually save on your bills can potentially be a lot.
When downsizing, chances are your new house is going to cost a lot less than your current one. Assuming you sell your house for a reasonable price, you could put a huge down payment toward the smaller space and end up reducing your mortgage. You may be in a financial position to have no mortgage at all and put the money away. You’ll also cut your power bill, water bill, cleaning costs (if you have a housekeeper), landscaping costs, and your property taxes. One caution, though, if you’re moving to a Townhouse or Condo. You will have HOA (Home Owner Assessment) charges for the maintenance of common areas. You’ll want to read what the fees cover. In this area you may save money each month, or this cost may go up.
How Will I Do in the Real Estate Market?
There is no beating around the bush. Real estate values have gone down in recent years. If you have owned your home in terms of decades, you have probably done well. But have you?
For one thing, will you be able to sell your house for what it’s worth? If you have to lower the price, how will that affect your anticipated new lifestyle?
It’s still a buyer’s market – at least for now – but the good news is, the buyer’s market can help you out, since you’ll also be buying. While you may have to sell your house for less than you’d hoped, you may also be able to buy the smaller place for less. You could come out even, but it’s worthwhile to look deeply into the house sales in your neighborhood, both where you’re coming from and where you are going.
A Few More Points to Ponder
Buying and selling real estate can have lots of unforeseen problems. If you have signed for a new place but have not yet sold the old one, you could end up with two mortgages and two sets of taxes, utilities and upkeep. There’s also the option of renting your house out until it sells.
Other surprise expenses can include any repairs or updates to make your new house suitable for you; homeowners’ association fees (if they apply) as well as any changes or repairs you might have to make to your existing home in order to get it sold.
If it turns out that downsizing will in fact be profitable for you, both financially and lifestyle-wise, the next consideration is what you’ll do with the money you save so you can achieve your long-term downsizing goals.
What Will I Do with all this extra money?
Saving a few hundred or a few thousand a month is fantastic! Make the most of your monthly savings and invest it. Investing just $500 a month, according to the Forbes Investopedia, can turn into $150,000 over 15 years.
With all of this in mind, you’re ready to make an informed downsizing decision.
Is It Worth It?
Is it time to downsize? Will a smaller space work for you? Can cutting your square footage in half have a positive effect on your lifestyle? Or your bank account?
Sizing down will almost always mean saving money on housing expenses. Lifestyle is perhaps the biggest question, and it depends entirely on your personal wants, needs and any changes you hope to make. Whether that’s a good thing or a bad thing is entirely up to you.
What’s Next?
Oh, You knew this was coming.
If you are considering the financial impact of downsizing, do yourself a favor and consult a Financial Planner.
If all systems are “go”, you need a qualified Realtor who is experienced in helping Seniors and Baby Boomers downsize their homes and lifestyles. As a bona fide Baby Boomer myself, I’m tuned into what a Senior (or near-Senior) may be looking for. I can help you achieve your new lifestyle both by helping you find a new Castle and finding the best new owner for the Castle you have now.
Visit my Website for listings and more information: http://www.NormaSellsNJHomes.com