Retiring can be very exciting, but even with the best planning, most people experience a few challenges along the way, including the challenges of navigating healthcare, keeping busy, and financially planning to ensure there’s enough money to stay afloat. A solution to those issues could be to downsize your home and move into a smaller place. Doing so could improve your financial security, free up some of your funds, and allow you to enjoy your retirement years even more.
Downsizing Can Enhance Your Financial Security
Even if you’ve created a solid financial plan going into your retirement years, if you aren’t bringing in a regular income, budgeting will be a major part of your life. If you look at your incoming funds and everyday expenses and find that money’s tighter than you’d like it to be, you may need to make a change. Along with retirement money tips like selling some of your unneeded possessions, investing wisely, and getting a part-time job, you can also consider downsizing.
If you decide to sell your existing house, you could make a good profit that you can use to buy a new property. Or you can put a chunk of it in a high-interest savings account and rent a smaller house, condo, or apartment. That high-interest account would be your emergency fund, and you should leave it alone unless you’re strapped for cash. You’ll find it incredibly reassuring to know you have that money if needed.
When many retirees sell their homes and downsize, they often use the extra money to invest in real estate by purchasing a property that they can live in or fix up and then rent out to others when the time is right. Another idea is to downsize your own home but then invest in other rental properties so you get a portion of the profits. In addition to the extra income you’ll earn, a perk of real estate investing includes getting help on your taxes by deducting the cost of repairs and depreciation expenses. Plus, it’s a way to diversify your portfolio, so if the economy disrupts one of your funds, you can still be financially secure.
Free Up Your Funds To Do What You Like
Downsizing to a smaller house with a reduced mortgage or cheaper rent means you can have more money left over to spend on the hobbies and vacations that make retirement great. Also, when you have a smaller home, you don’t need to spend as much on furniture and decor so you can save even more cash. A downsized house also means fewer rooms to cool and heat during the seasons and fewer lights to turn on, all of which save you money on utility costs.
If you find that you’re saving a big chunk of money and have always wanted to escape to a warmer climate during the winters, this could be your chance to become a snowbird. You can be a snowbird on a budget by being realistic about what you can afford. You don’t need to buy a second house outright. Instead, you could invest in a timeshare, which would allow you to visit during certain times of the year and enjoy the home without the need to maintain it. Another option is to look into a short-term rental that you could stay in for a couple of months at a time and then leave without any financial obligations.
When you don’t have to stress over owning a large home and the maintenance it requires, you can have more time to focus on your hobbies. Activities like gardening, painting, woodworking, or building arts and crafts can help you to fit in more physical activity. You’ll also keep your brain sharp, which is excellent because continuously exercising your cognitive functions is important as you age. When you need to worry less about money, you can also spend more time volunteering in the neighborhood or around the world for organizations like Habitat for Humanity, where you could build houses for other folks in need.
Considerations To Make Before Taking A Big Step
Downsizing has many benefits, but before you pick up and move, you need to plan and make some considerations. Do your research and find out how much your home is worth, which you can do with the help of a real estate agent. If you sell, ensure you’ll make enough money to afford a smaller property before signing any contracts. At the same time, look at homes in your desired area and check prices to see what you can realistically afford.
Since money may be tight during retirement, you need to know where all of your money is going. Be aware of all the fees and expenses that many tend to forget, like closing costs, taxes, and the cost of relocation. You’ll also need to consider the insurance price and the potential change in interest rates.
In addition to the costs associated with your house, think about what you plan to do with your free time when you get your new home. Will you have enough money left over to take those planned vacations or spoil your grandchildren how you want to? Sit down, look at the facts, and weigh all the pros and cons to make the wisest decision possible.
There are many perks to downsizing as a senior, especially if you don’t need all the space you used to and are looking for a simpler life. Consider the option of going small, and you could find that it’s the key to a more fulfilling retirement.