We Really Don’t Need A Huge Home

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When I’m at home, you can usually find me in the family room or the kitchen. I don’t go to my room unless I need to change or am going to bed. And I don’t go to the bathroom unless I need to go. 🙂

And yet there are so many people living in homes with rooms they hardly use. This is, of course, attributable to owning a HUGE house. While I’m not in agreement with living in mega-gigantic homes, I would also like to mention that I’m not in total agreement with those tiny houses either, where there may not be much of a “personal space” concept. I’m more of an in the middle type, not too big, not too small, just sufficient and comfortable with a little room to breathe.

Each room in our home has functionality, serves its purpose, and provides an atmosphere of comfort and relaxation. We spend a reasonable amount of time in each space. And in terms of cleanliness, I don’t have to waste a weekend afternoon or hire help if the house it a mess and it needs to be cleaned. The main floor of our home can be cleaned in 20-30 minutes tops.

We could have purchased a larger home if we wanted to, yet are very comfortable in the space we have and can continue to grow our family in it without any problems concerning space.

I believe that if more people downsized their living quarters it will put them in a position to upsize their overall quality of life.

When I ask people what their hobbies are or what they would like to do in their spare time, many say try new restaurants, travel, play tennis or some other sport, go to a movie or learn something on YouTube. I have never heard anyone say I like to walk around my huge home and peek into rooms that are empty to make sure everything is the way it’s supposed to be.

Typical Income VS Home Expense Ratio

Based on a study conducted by Harvard University, millions of Americans spend more than 30% of their income on housing. And just over 17% spend over half, that is, 50% of their income on housing!

Of course, a lot of these are in cities where you don’t get much bang for your buck. However, many are in suburban areas as well, where the cost is most likely attributable to the square footage of the home. And don’t forget with a larger home come larger property taxes and larger utility bills.

Business Insider says that “[e]ven billionaire Warren Buffet keeps his housing costs low. Buffett lives in a modest house that’s worth .001% of his total wealth.” Of course, for many of us, it’s natural to upgrade our lifestyle a bit when we get a raise or promotion, but it’s important to understand and calculate how much of that is really making a difference to our bottom line or take-home pay to justify lifestyle changes.

For example, let’s suppose you’re making $50,000 and living in a 2 bedroom condo with a mortgage of around $700 per month. Then you switch a job that comes with a nice 30% raise in salary and are now sitting at $65,000, woohoo!

With this extra money, you decide to move into a new home with a mortgage that’s doubled to $1,400 per month. Guess what, that’s not a good idea. Because your salary increase on a monthly basis is roughly only $800 after taxes and deductions for health benefits. The $800 will be offset by the $700 increase in mortgage payment. Now you have $100 left, but wait, again there are property taxes and utilities which increase with a larger home. Consequently, the $100 plus some more will have to go towards property taxes and utilities leaving you with less in your pocket than you did when you were in a condo.

And now, despite receiving a nice raise, you’re struggling just because we bit off more than we can chew. This is also known as lifestyle inflation, something that can be avoided.

Instead, take the bump in salary, celebrate with a nice evening out, gifts for your loved ones and then increase your savings and investment rates.

Living Large In A Smaller Space

My wife and I have actually talked about downsizing when we reach retirement. We have a long way to go, but our initial plan is to sell the house and move into a condo that is, not in the city, but not in the suburbs either. You know those semi city /town center type communities, the ones with apartments and little shops at the bottom. We’re thinking those might be a viable solution.

This is a nice one in Annapolis MD, which is about 25 minutes from where we currently live. This town center has luxury apartments, shops, restaurants, a fitness center, and a community lounge.

Even one of my favorite writers Financial Samurai recently downsized his primary living space; some of the reasons being lesser maintenance and a shorter commute to go downtown.

Should You Buy In The First Place?

There’s even the argument about buying a home in the first place. Younger people prefer to rent over buying for reasons outlined by the Motley Fool. The reasons include the time and complexity of the mortgage process, coming up with a down payment, less money available for other things like traveling, and lack of job flexibility.

If you’re able to rent at a low cost so that it allows you to consistently save and invest, then that may be fine. True you’re not building any equity, however, you’re building a return on your investments. Through saving and investing the money you would have used for your down payment as well as excess savings from low rent, lack of property tax dues and maybe HOA fees, renting could be a great long-term option.

We all know that from your budget, the biggest expense is your mortgage or rent.  And if this can be trimmed down significantly, with the excess saved and invested, your financial future will be significantly brighter. Size does matter.

Join The Discussion:

  1. Do you sometimes wonder if the space you’re living in can be downsized?
  2. Do you have rooms in your home that you haven’t stepped foot into for days?
  3. Have you downsized your home? If you, how are you adjusting and do you feel you’ve made the right decision?

 

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