I don’t know about you but I have a habit of always wanting and buying the biggest and the best. Often this is a stretch financially but I have always had the belief that you buy the best and you get the best result. Of course, this is not always the case, unfortunately. Recently I was faced with the prospect of having to downsize my vehicle because I simply couldn’t afford to keep the big SUV on the road any more. This got me thinking some more about how to save money by downsizing
The cost of fuel is becoming prohibitive for drivers of larger vehicles, so much so that sales of the big, thirsty vehicles like Hummers are on the decline. More and more people are opting for smaller, more economical cars to reduce running costs as well greenhouse gas emissions. Folk are becoming more realistic and rejecting the out-dated belief that a large car indicates success. And really, who needs a big seven-seater just to impress the neighbors when you are the only person in it? My fuel costs have almost halved with my nifty little new car, I have saved hundreds of dollars on insurance and it is a breeze to park! Downsizing my vehicle certainly has saved me money and will continue to do so for as long as I have the car.
Many homeowners are struggling to pay their mortgages in these troubled financial times. Some are realizing that downsizing their home could be the answer to getting back some control over their lives, not to mention reducing the stress they are living under. Downsizing the home is traditionally the domain of retirees and empty-nesters but ordinary homeowners are now starting to consider it a sensible move. Many are realizing that all that space is dragging them down financially. How much room does a family really need?
Statistics released by the National Association of Home Builders show the average home size in the 1970s was 1400 square feet; in 2004, this had blown out to a whopping 2330 square feet, almost twice the size. As families are reported to be smaller, why do we need all that extra space? While there’s many reasons why house sizes have grown so much, I reckon we need more space to store all the ‘stuff’ we have these days. How long is it since you cleared out all those spaces where you store the things you don’t use very often, if ever? How much space is used for storage in your home?
Here is an interesting exercise – get a pen and paper; write down the total square footage of your house and the monthly mortgage or rent amount you pay. Divide the dollars by the square feet and you will get a figure that is the cost of each square foot of space per month. Next, figure out how many square feet you have allocated to storage, making sure you remember all closets, spare rooms, garage, basement and attic. Multiply that by your monthly cost per square foot figure you got in the beginning and you will find out how much it is costing you to store all that stuff. Does that inspire you to have a giant clean-out?
Here is an example of the above exercise. Just say your current home is a total of 2,800 square feet and your mortgage costs you $2000 per month. You are actually paying 71 cents for every square foot of house. If you determine that you have 1000 square feet allocated to storage, it’s costing you $710 a month just to store all that stuff! How much of it could you get rid of so you don’t need the space and would be able to downsize and save money?
Knowing what percentage of your current home you have allocated to storage can show you that downsizing is possible without any loss of living space, but huge savings in a variety of ways. Firstly, you will be paying less for a smaller home so there is an up-front saving on mortgage repayments before you even start. Utility bills will be lower because there is less space to heat and cool; try applying the same formula we used to calculate storage costs to work out what it costs you per square foot for utilities. Real estate taxes are calculated on the size of the house so a smaller house will attract a lower tax rate. Maintenance costs will be lower as will your insurance premiums.
As well as downsizing your car and your house, what else can you think of where going smaller has the potential to save you money? Credit cards come immediately to my mind; by downsizing the number of cards you have, as well as their balances and credit limits, you are certain to save lots of money in interest and repayments. I hope this article has started you thinking about how you can save money by downsizing.