This year I am declaring three New Year’s Resolutions in three categories: finances, personal and blog-related. These resolutions are really just big goals, but since the idea of declaring New Year’s resolutions this time of year is popular I’ll play along.
Our 2009 New Year’s resolution for finances is quite simple, but will take some effort to pull off. We want to downsize our house. Yes, in the age of bigger is better we want to reverse course. Our current home is not overly extravagant, but it does require a little more of our paycheck than we would like to dedicate to living quarters. While the small house movement (via Lazy Man and Money) does appeal to me, I don’t think I could convince the wife and kids to go to such extremes, so we’ll stick with a modest-sized home significantly cheaper than the one we are in now.
Benefits of Downsizing House
The first benefit is the most obvious–a lower monthly mortgage payment! We have thought long and hard about staying put and continuing to pay for our current home versus making the move to downsize. The number one motivation behind moving is to reduce our mortgage and free up that money for additional financial goals. As it is, too much of our income goes towards making the mortgage payment, and not enough goes towards financing other dreams. We aren’t quite “house poor,” but housing eats up too much of our budget.
A smaller home means lower utilities. Our summers are brutally hot, and seem to last for five months out of the year (May-September). Cooling a large home breaks our utilities budget every single month during the summer. Our current house lacks a wood-burning fireplace, something we would like to utilize in the milder winters to heat the home without running a heat pump.
Moving to a small home will force us to simplify our lives. This one seems a bit strange, but we would like to move into a smaller home and reduce a lot of the clutter we have now. Of course, we could simply reduce the clutter in the home we are in now, but without space concerns there isn’t a strong motivation to do so. I like the idea of giving away a large percentage of unused things, moving to a smaller home with a fresh start, and living a more modest, simple existence.
A lower mortgage puts us closer to financial independence. In my favorite personal finance book Your Money or Your Life, the authors suggest minimizing your monthly expenses so that you can afford to do something you really love without worrying about the salary. So many of us have become slaves to stuff, particularly our homes, that we continue to drag ourselves to an unfulfilling job simply to make a mortgage payment. I don’t want to be that guy in another ten or fifteen years.
We plan to payoff our mortgage in about ten years and enjoy living completely debt free from that point forward. Think about it; with no house payment or other debts, and practicing frugal living, it wouldn’ t take much income to meet our basic needs. Free from the burden of earning a high salary to pay for stuff we would be able to turn our attention to causes that matter more than pushing paper.
In the coming weeks I’ll be sharing more about our journey to downsize homes. First, we need to do a couple small things around our current home to improve its selling condition, and I’ll need to contact our real estate agent for some advice on pulling off a sell/buy in this market. I wonder what her reaction will be when I tell her we want to move back into a “starter home?” A few years ago this probably seemed strange, but I bet we aren’t the only ones considering such a move in these times.