Downsizing seems like such a bad thing. The idea of reducing or eliminating assets such as your house or car feels like cruel and unusual punishment. If you’re like most people, the words failure and setback come to mind, particularly for Americans that are used to living large and beyond their means. Be that as it may, downsizing could be a blessing in disguise. It could be the most efficient way to get your finances in order so you can afford the lifestyle you desire.
Don’t let society’s consensus of downsizing cause you to struggle unnecessarily. Believe it or not, many people have taken a step back, relinquished possessions, and found peace of mind like nothing they’ve ever experienced. Below is a closer look at the potentially life-changing benefits of downsizing.
Fewer Financial Obligations
Downsizing can get you closer to financial freedom than you realize. If you’re living in a house or expensive apartment that costs thousands of dollars a month, moving to a smaller residence can cut those costs in half.
You won’t just save on the monthly mortgage or rent, but you’ll reduce your utility bills too. A homeowner moving from a house to an apartment also relinquishes themselves from the cost of maintenance, repairs, and property taxes.
The same is true for cars. If your car note is too high, trading your vehicle in for something more affordable will save you thousands of dollars a year. If you’re a savvy shopper, you might even find a car that doesn’t require financing. A smaller or less expensive vehicle is also cheaper to insure.
Improve Credit (Over Time)
When you have high-balance or high-interest debts like home and car loans, they remain on your credit report until you’ve paid them off. If you’re already behind on payments or at risk of foreclosure and repossession, chances are your credit rating is in the toilet.
If you can sell your home or car for enough money to pay the loans off, then these are financial obligations you won’t have to worry about. Your mortgage lender or auto financier will then mark the loan as paid, causing your credit score to increase within a few months. Finally, it eliminates the adverse effects of having a foreclosure or repossession on your financial records, which could haunt you for years.
Less Stress (Better Health)
Trying to maintain bills that you can’t afford is stressful. If you’re dealing with financial accounts in negative standing, the stress is increased by the threat of further collection actions. However, if you downsize, you get rid of a lot of your financial obligations, resulting in lower stress levels.
As stress is the common culprit for many health problems, reducing the stress in your life will lead to improved health and wellness. Believe it or not, the healthier you are, the less money you spend on healthcare costs like doctor’s visits, medications, and other treatments.
Whether you got rid of your 2021 sedan or moved back in with your parents to downsize, it’s an opportunity to reset financially. While you may still have bills to pay, they’re a lot less than before. You can use the extra money to pay down your debts, increase your savings, invest, or even start a business. Then, when you’ve gathered your financial footing, you can figure out how to move out of your parents house or buy a newer model car without the stress.
When you’re living in a world where living beyond your means is the norm, downsizing can feel like an embarrassing move to consider. However, the reality is that it can be the most freeing experience. Downsizing minimizes your financial obligations, improves your credit, reduces stress, and allows you to press the reset button on your finances. If you make sound money decisions and implement solid management strategies during this time, you can upgrade your life in ways you never thought possible.