If you are managing your own or your household’s budget, chances are you are always on the lookout for money decisions that can yield the most financial benefits. You might even be doing it on an everyday basis on so many levels in your budget. You might be doing your groceries in different stores to get the lowest priced item. You might even have strict light and water use at home to manage your utilities.
It is possible that you are already seeing the warning signs of being debt or you are having your first child that is why you want to start having a better household budget. You might also be coming from debt problems and you want to fix your finances and stay away from going back into your old financial situation. You might also be nearing retirement and feel that you need to better manage your money.
One of the things that a lot of consumers are doing to manage their budget better is to take advantage of the financial benefits of downsizing their home. It is common for those people that are nearing or are already in retirement but it is not only for them. Start up families and even those with children already can benefit from a smaller home.
And most people would seriously consider any moves that will help them with their money management especially with all the debts and loan payments. Nerdwallet.com shares that the average household budget contains about $33,000 in student loan debt per parent, about $15,000 in credit card debt and a whopping $156,000 in mortgage loans.
Downsizing has financial advantages
If you are looking to downsize your home for financial benefits, here are some of the things you can expect to happen. Of course these are not assurances because making all these happen will still depend largely on doing due diligence in transferring to a new and smaller home.
- Lower property tax payments. CNN.com shares that property taxes in the country differ from one state or county to another but the ones that are most expensive are in Bergen County, N.J with average of $8,893 property tax followed by Nassau County and Westchester County both in New York with averages of $9,080 and $9,647 respectively. Look for a way to make sure that you are in a place where the property tax is not that high. You need to understand that your taxes depend on the place and that is where your first consideration. Of course the size of your actual property will have a big bearing on how low your tax will be
- Smaller insurance premium. The same idea with the taxes applies with the insurance payment because the smaller the area to cover, the lower the insurance payment is. You need to talk with your insurance company to see how low your premium payments will go based on a smaller house. If you are going to take up a new mortgage loan to pay for the smaller house, there are lenders that will offer an escrow account where you pay taxes and insurance on a monthly basis and it stays in that account to meet the annual payments. You might see this go down but the details would have to depend on your county and insurance company.
- Lower payment for utilities. One of the most common financial mistakes people make is they do not look into their utilities and just go with whatever payment they have at the end of the month. You can control your bills by putting a system in place to make sure you are not taking the use of your lights, water and other utilities for granted. And transferring to a smaller home has financial benefits as payment for utilities can go down. It is still not an assurance that a smaller house would equate to lower payments because if you leave the lights , tv, water and others open all day then there might not be much of a difference.
- Easier upkeep. This is one of the best things about transferring to a smaller house because you will not have a hard time cleaning and maintaining the place. This is ideal for older consumers who are transferring to a smaller house due to retirement and essentially old age. They will have an easier time cleaning the place ne making sure that the house is in tip top shape.
What to expect in a new home
Once you transfer into a new and smaller house, you might have your sights set on the monetary benefits and overlook some of the realizations that comes with it. Here are some of the factors that you need to look into before trying to reap the financial benefits of a smaller house.
- You might need to take out a mortgage loan. There are pitfalls when taking out loans and mortgage loans are of them. This becomes more tricky if you are trying to get one for a retirement house and you have an existing house. You cannot handle two mortgage payments on your existing house and the small house so you need to let go of the old one first. Sell it so you have money to buy the smaller house. If you can factor in the payment in your budget then use the money from the sale of your old house into your retirement. If not then you can use the money to pay for the smaller one and save the rest.
- Take into consideration your needs. It might be a small house and you get to pay lower taxes and insurance and even utilities but are the establishments accessible to your house. Maybe the very reason why the house is priced low is because it is in a secluded spot. Gallup.com shares that about 37% of Americans expect they will have to retire at the age of 65. When you get to this age, you would need a lot of security in your place to cover medical and everyday needs. The hospital, grocery and even park becomes places of interest and they need to be located close enough to your house.
- Are you comfortable with the neighbourhood. The people that lives close to you becomes a topic because you are essentially moving to a new place which means new neighbours. You might not like it how one of the neighbours seems to have endless parties every weekend when you just want to take a long break.
- Are there other retirees in the area. If you are moving to a smaller house for retirement reasons, one way to know if the place is suitable for retirees like you is to check it there are others such as you that lives in the area. You can use this as a gauge to determine if the area is ideal for retirees. Friends that shares the same point of view in life as you do is also important and other retirees can offer that to you if they are around. There are communities that are ideal for retirees and there are those that are best suited for start-up families so take your pick.
There are financial benefits to moving to a smaller house because if done right, it can greatly help lower down your expenses. But you need to make sure that before you jump ship and transfer to another house, you are making the right choice. You also need to have an idea on some of the changes that can happen to be able to manage expectations.