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Downsizing is typically associated with retirees who seek to lower their housing payments by moving into smaller homes. But when people choose to downsize, and why they want to, may be shifting.
A survey from real estate company Opendoor found that 52% of respondents want a smaller home. This is one figure in a series of responses that highlight a trend toward simple-sizing—that is, deprioritizing large homes or excess possessions and embracing simpler living.
Beyond downsizing by moving into a smaller space, reducing your financial liabilities and decluttering your possessions can have a range of financial and personal benefits. Here's what you need to know.
Why Downsize Early in Life?
The benefits of downsizing early in life could include paying less money toward housing and purchases, and the ability to reclaim time you would otherwise be putting toward maintenance. As minimalism becomes mainstream, reasons for embracing less vary person to person.
Respondents to the Opendoor survey reported the desire to spend more time on healthy habits, such as working out and eating well, as a top reason for simplifying now. They also ranked spending more quality time with loved ones and prioritizing alone time as equally important.
The data also reflects an overall priority shift away from large homes. A wide majority rated "simple living" as being important to them, and most also reported intentionally simplifying their life over the past year. More than half of respondents—61%—reported that they would be willing to live someplace smaller.
Some opt for smaller houses as a way to reduce barriers to buying their first home amid record home prices and high mortgage rates. Smaller alternatives to traditional homes, including townhouses, are also becoming more popular.
Learn more >> Financial Pros and Cons of Downsizing Your Home
How to Downsize Your Life
There aren't one-size-fits-all approaches to downsizing—after all, where you live and what you own is deeply personal. How and when you choose to pare down should be a reflection of your own priorities and vision for your financial life.
With that in mind, these tips can help you chart your own course toward slimming down your lifestyle.
1. Scale Back Your Possessions
Of those surveyed by Opendoor, 73% had intentions to declutter this year. Decluttering and donating the things you don't need not only makes fitting in a smaller space more attainable, but some find the simplicity of owning less to be a benefit in itself. Some research even suggests that a neater space comes with mood-boosting benefits.
2. Revisit Your Budget
Since your budget is a plan for how you want to put your income toward the things that matter most to you, build your vision for simplicity directly into it. Prioritizing needs over wants and cutting back on spending are top reasons that people choose to simplify, and a budget is a roadmap to get there.
Budgeting for your downsize could look like increasing the amount of money you put directly into savings each paycheck and decreasing the amount you leave open for discretionary purchases. Or, it could mean directing more of your money toward experiences. For instance, you could start a vacation sinking fund.
If you're already making good progress toward your financial goals, you might find setting up a recurring charitable donation aligns well with your desire to consume less while focusing on the things that are important to you.
Find High-Yield Savings Accounts
3. Sleep on Large Purchases
Impulse spending can lead to accumulating stuff when you're in the process of trying to pare down. You can increase your odds of avoiding purchases you'll regret later by implementing a waiting period for large purchases.
For example, you could vow to hold off for a week before spending more than $100 on anything discretionary. That way, you'll avoid derailing your downsizing efforts—and your budget.
Learn more >> How to Stop Impulse Spending
4. Consider Smaller Housing
Downsizing to a smaller home may be an option for saving money each month, though the actual numbers will depend on your situation. If you currently have a mortgage, downsizing to a smaller space may not save you money if your new home loan would come at a higher interest rate. That said, if you're relocating somewhere with cheaper housing, you may still be able to save.
Lowering your square footage requirements could open up areas with desirable amenities and easy access to necessities or wants, such as nearby grocery stores, dining and parks. Almost half of Opendoor survey respondents report wanting to drive less as one of their simple living aspirations. Choosing an area where you can commute using green transportation options (such as walking or biking) can help you save money while staying active.
5. Downsize Your Digital Life Too
With lives lived increasingly online, the cyber baggage you're lugging around could have a real impact. Pare down by deleting old accounts you no longer use, which is also great for your digital hygiene: Old accounts can become points of entry for identity thieves phishing for personal or financial information.
If you aren't already, you should also consider using a password manager. Not only are they more efficient and give you less to remember, but they also allow you to avoid security risks with unique, hard-to-guess passwords.
6. Simplify Your Finances
You can streamline your finances by setting up systems that work for you. Here are some simple habits to consider:
- Automate your bill payments
- Opt for paperless billing
- Use a budgeting app that automatically tracks and sorts your spending
- Automate your savings by setting up transfers each payday
Should You Downsize to Save Money?
People who are thinking of downsizing early may be doing so in pursuit of self-care, but there are more ways to do this than just moving into a smaller home and buying less. Finding solutions that work well for you may take some digging. In some cases, it may make sense to enlist the help of a professional, such as a financial counselor or certified financial planner.