There comes a time in life when it may make sense to downsize!
Children may have grown up, and left home. A spouse may regrettably pass away. Perhaps an ever-increasing cost of living demands changes to accommodate a lower budgeted income due to retirement, loss of a job, etc.
Of course there may be more and/or other reasons to consider downsizing. Regardless of the reason, it takes time to plan and manage such a complex process.
If you are retiring and planning to live on income earned from investments, then – more than ever – taking time to calculate and record ongoing expenses to arrive at a monthly budget become critical. Remember to also include planning for any unexpected expenses in a monthly budget, like illness, car or home repairs, etc.
If your home has no mortgage owing against it (at retirement age you ideally shouldn’t have a mortgage), and you wish to remain in your current home… then you should calculate whether living on your investment income would cover all your living expenses.
Calculate your living expenses by creating a simple spreadsheet. There are many sample budgets available on the Internet, for free.
Make sure to include the cost of food, property tax, assumed maintenance costs, and utilities based on historical costs and expected increases. If your cost of living is higher than your income, it is time to take the next step to downsize so that you can live according to your income.
Ask yourself some tough questions!
Do you really need to live and maintain a huge property? Does the idea of a smaller apartment or condo offer you a chance to downsize your total living expenses? Finding a smaller condo that is e.g. within walking distance to shops can be a huge benefit. Shopping locally may reduce or eliminate the ongoing cost and maintenance required for a car.
An opportunity to save on transportation costs would be complemented by walking as part of a daily routine, offering a good chance at regular, light exercise. Or perhaps you could consider a condo near the beach, offering an opportunity to walk outdoors, and to enjoy the seashore experience!
Selling you existing home, and purchasing a smaller home could free up additional funds for investment. Moreover, a smaller property may also offer savings on the ongoing utility costs, property taxes and maintenance costs.
If you decide to keep your property, calculate whether the plan to rent it out could cover the total cost of ownership. Can renting your existing home also cover the cost of a smaller home/apartment for yourself to live in?
Life is full of choices and retirement planning is all part of the adventure. Whatever you do, don’t panic!
Take time and make choices that to accommodate your desired lifestyle. Downsizing may also mean more time, to do more with your available time. This may include time to perhaps engage in some part-time work for extra cash, volunteer your services for the benefit of your favorite non-profit and their charitable mission… and more importantly, to do the things you really love!
Don’t get stuck worrying about money in retirement! Downsizing your existing home is just one of many alternatives you will be able to consider as you plan your golden years!