Most people tend to think that buying a larger home means you are moving up in life. According to Dave Ramsey, there are many reasons why this isn’t the case.
If you are living in a larger home than you need because you have collected a lot of stuff over the years, you should consider going through it and selling what you no longer use or need. Once you do that, you’d be surprised at how much space you have! Then thinking about downsizing won’t seem so difficult.
Looking at the financial aspect of downsizing may be even more convincing. Think of how much extra money you’d have if you were able to reduce your mortgage by $500 a month. Here are 3 ways you could use that extra money:
1. Overcome your debt
If you have student loans (or any other kind of debt), having an extra $500 a month would allow you to pay off your debt much sooner. How great would it feel to be able to pay off your loans years sooner just by losing some of your extra space?
2. Strengthen your retirement fund
Once you’re debt free, you can focus more on your future. Dave Ramsey recommends investing 15% of your household income into Roth IRAs and pre-tax retirement plans. If you are having a hard time saving up 15%, the extra $500 a month would really help.
3. Pay off your mortgage
If you buy a smaller home, use the money you make off selling your current home and pay cash for your new one. You would much more money to save and spend in other ways if you have no mortgage to pay! If you can’t pay cash, don’t worry, opt for a 15-year fixed rate mortgage and put 10-20% (or more if you’re able) down on your new home. Use that $500 you’re saving on your monthly payment.
How do you decide if downsizing is a good idea for you?
Downsizing isn’t always the best option for everyone. It does make sense for you to at least consider the idea because it could be beneficial for you in many aspects. If you want to learn more about downsizing, or you’ve already decided it’s what you want to do, let us know and we can help you take that next step!