5 Financial Signs it’s Time to Downsize
Like most people, you probably think only certain people need to downsize. Maybe you picture the typical empty-nester retiree who has too much space and not enough mobility to handle their sprawling property.
In reality, anyone could need to downsize, regardless of their age or housing situation. You could, too, whether you’re in the prime of your career, about to retire, or somewhere in between. Here are five signs to help you determine if you’re an ideal candidate for downsizing.
1. Your Housing Costs Take up More Than 30 Percent
Most financial advisors believe you shouldn’t let your housing costs exceed 30 percent of your budget. Anything above this may put pressure on your budget, leaving you with less money to cover bills or fun spending.
In this housing market, keeping your housing costs below 30 percent can be tricky, but downsizing to a smaller home in a more affordable area can help you come under this benchmark.
2. You Fear the Unexpected
What happens if your water heater starts to leak, or your car needs a new transmission? Have you been able to save enough with your housing costs so high? Most people don’t have adequate savings, and they would have to take out a personal loan to cover an unexpected $1,000.
If you’re in the same boat, an installment loan can help you handle your unexpected emergency right away, and you won’t have to worry about paying it all back right away. One of the benefits of installment loans is this kind of peace of mind knowing you can repay what you owe in several smaller chunks rather than one lump payment.
But as convenient as installment loans can be, they’re for emergencies only. You need to budget so you don’t always have to borrow when an unexpected expense comes along.
3. You Can’t Keep up with Expected Repairs or Maintenance
Unexpected repairs are one thing. They can be hard to predict and plan around, which is why installment loans come in handy. But expected repairs are another thing entirely. Every home needs annual maintenance and repairs to stay in good condition.
If you find it increasingly challenging to afford the materials, equipment, or professionals to keep up with these chores, you may need to downsize. Neglecting necessary upkeep only works for so long. In fact, this technique usually costs more as ignored chores get worse over time and need bigger repairs.
Moving to a smaller, more manageable property can help reduce ongoing maintenance and repair expenses.
4. Retirement is Approaching
If you started saving for retirement late in the game, you might be far from the $1 million goal for a healthy nest egg. You wouldn’t be alone. More than half of Americans in their 50s and 60s don’t have enough to retire on time.
If you own your home, tapping into your equity can be a simple way to boost these savings. You can cash-in during this seller’s market and purchase a much smaller home to keep most of your earnings.
5. Your Location Affects Your Career
Holding onto your home could be limiting your finances, even if your housing costs come under the 30-percent benchmark. If you live in an area with limited career opportunities, relocating where job prospects are better can significantly impact your financial stability.
And there you have it — five financial reasons why you should consider downsizing.
