Should you stay or should you go? That’s the question.

Posted by Kerry Hannon.
A key step in my signature “fitness program” is financial fitness, along with physical and spiritual fitness.
Financial fitness, though, is truly the lynchpin if you want to live your passions  in your bonus years… and even sooner.
When you’re financially fit, you’re nimble and able to pursue the kind of work you really want to do, be your own boss, travel, or spend more time on your giving back efforts pro bono.
For many people, the simplest, and, perhaps, boldest move to get into financial shape is to, well, move, to sell their current home and buy something smaller. The cost of housing and all that goes with home ownership, afterall, is one big ticket item in all of our monthly budgets. And the equity we’ve built up in our homes may be our biggest asset.
Here are the six reasons you might consider downsizing.
  1. Your kids are grown and launched, and as empty nesters, you really don’t need the extra space.
  2. You have some big debts hanging over your head. The move might allow you to pay those down with the proceeds from the sale that you don’t reinvest in a new home. Debt is a dream killer.
  3. A smaller home often means less time and money spent on upkeep, and often lower taxes and utility bills.
  4. Downsizing might also result in a smaller mortgage, or potentially none at all, if you pay cash for your new digs.
  5. With lower monthly housing outlays, you might be able to boost your emergency and retirement funds.
  6. It can free up funds to be spent on activities that bring meaning and joy to your life such as travel or pursuing hobbies.
Whether or not downsizing is a real possibility for you will depend upon a myriad of factors. If the timing is right for you to explore trading down, you might start by asking a local real estate agent to help you get a bead on what your current home is worth and give you a ballpark figure for the price for a smaller abode in your town.
One tip: You will probably get the best deal on your smaller residence, if you make an offer to buy after you’ve sold your current home. That’s because having the purchase contingent on that sale can slow the process down and diminish your bargaining power. Cash is king when it comes to negotiating.
You might also consider renting for a while and put your stuff in storage temporarily. This will give you time to find the perfect home to suit your needs in the years ahead. This is a particularly good idea, if you opt to relocate to another state to be closer to family.
While these are all practical financial reasons to downsize, for many of us, it’s not so black and white. The reasons not to downsize are often emotional and psychological, not monetary ones, and it’s hard to put a price tag on that.
Our homes are often entwined with our sense of identity. Be honest–our egos can come into play. A home can be a symbol of success. Then, too, our home is often a place of respite and comfort. It might represent years of happy memories. And if you’ve paid off the mortgage, or nearly paid it off, and you don’t feel the financial pressure from a monthly obligation, downsizing might not have enough of a financial upside that makes up for moving on.
Here are a few reasons you might consider not pulling up stakes:
  1. Uprooting your life and relocating, even if it’s just a few miles down the road, might be more stressful and traumatic than the positive possibilities of streamlining your housing expenses and responsibilities.
  2. You might be happier staying right where you are, surrounded by a community filled with friends, family and familiar haunts. If so, you might review what modifications need to be made to your home–whether it’s an addition to put the master bedroom on the first floor, or to add other improvements geared to make aging in place more comfortable, which ultimately could be cheaper than moving into a new home.
  3. It’s not always less expensive to downsize. Moving can be expensive from getting your home in shipshape to attract a buyer to real estate transaction fees to paying movers. Meantime, if you sell your big house in a suburban, or rural area, to move to a condo in the city, for example, it’s quite possible that it will cost you more each month. Condo sales prices in big cities with a limited supply like New York, San Francisco and Washington DC can be higher than you imagine. While you may have lower maintenance costs, you also may have pricey condo fees, to offset that savings.
  4. Depending on your situation, you might consider renting out a room or portion of your home to bring in some extra cash.
My advice is to go slow and be thoughtful about your motivations for downsizing. Take time to do some soul searching and budget crunching. Should you stay or should you go will rarely be a slam-dunk decision, but for many of us, it can be a ticket to financial and psychological freedom.
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July 25, 2017