Don’t Be Afraid to Make a BIG Change

“Downsizing”…it’s been a buzzword for the last few years.  Companies are downsizing, folks are downsizing their homes, heck even my Nature Valley granola bars are smaller than they used to be. (Did they think we wouldn’t notice? Sorry, off-topic.)

Fortunately, I haven’t been on the receiving end of a company downsizing, but we did choose to downsize our home.  This was part of our “let’s get all ninja-like” on that $40k of debt we had. Plus, we knew we had to get our living expenses down ASAP if we were going to stop living paycheck-to-paycheck.   Naturally, we looked to our  biggest expense…housing.

Our mortgage was about $400k, give or take.  The PITI payment (Principal + Interest + Taxes + Insurance) was just shy of $3,000.   Aye, aye, aye.  So we did something drastic.  We sold our house and MOVED.  Now, let me tell you that I get it…I really do…people are attached to their houses…”Waaaaaah!!! I brought my babies home here…I installed the tile in the bathroom myself…the concrete driveway has our handprints embedded with our cutie-patootie names scribbled next to them! Waaaaah!!!”

I didn’t say it was easy.  NOT AT ALL.  But the house no longer fit our financial goals, plain and simple.  Was it nice living a cushy life in the suburbs, sitting in a 2,600 square foot house with an elegant two-story entry and custom backyard?  Um, yeah.   But was it too much space for too much money?  Absolutely.   It wasn’t hard to come up with the “cons” of downsizing; it’s a pain in the @ss to move, we liked our nice roomy house, we wouldn’t have 3 bathrooms anymore, where would everyone gather for Christmas, blah, blah, blah.  We had to think a little harder to get our list of “pros”, but we did…

• Less square footage to clean / maintain / furnish
• Smaller home encourages more family interaction
• Lower heating / cooling costs
• Lower insurance costs
• Lower property taxes
• LOWER MORTGAGE PAYMENT!

So we did it.  And we don’t regret it for a single second.  We sold our primary home and moved in to the 980 square foot rental we owned, that also happened to be my husband’s childhood home.  The home was passed down to him, so the only debt associated with it was a small $75,000 remodel loan he used to spruce it up and modernize it.  As a bonus, the tax basis of the house also passed down to my husband from when his parents owned it, so our TOTAL ANNUAL property taxes were now only $500.  Yes, only 2 zeroes there.

Here’s the breakdown:

	Big House	Small House
Utilities	420	190
Insurance	100	35
Property Taxes	410	42
Mortgage Pmt (P+I)	2,390	500
Monthly TOTAL	$3,320	$767
ANNUALIZED	$39,840	$9,204

Just looking at the monthly difference, our cash flow increased over $2,500 from that one change alone.  That’s OVER $30,000 ANNUALLY.   Remember, this is just MY experience.  Yes, we had another home at our disposal with a very low loan and ridiculously low property taxes.  My case may be an extreme example, but even if someone downsized and had half the results we did, that is a SCORE.  And I haven’t even mentioned home equity.  In northern California, where we live, there was no equity to be had when we sold.  But for some of you, it may be smarter to sell your house, move into a rental, and throw that equity at your debt/savings.

So this is the point where you start looking at priorities.  What’s important to you?  Continuing to pay that too-expensive rental/mortgage payment…or get out from under the high cost, the high stress and get control of a major expense? For some of you, it may not make sense to go through the hassle of moving just to save $200 a month.  But I’m fairly sure that for many of us, we’re spending too much of our income just to keep a roof over our head.  I dare you…run the numbers yourself…what do you see?