With the increasing cost of living and endless move higher in home prices, many people are choosing alternative paths to financial peace. One idea that is slowly spreading throughout the US is the move toward smaller homes.
Nina Glinkski wrote an article in Bloomberg recently highlighting this idea and she featured some examples of people downsizing their expense profile to improve their quality of life. One fellow featured, Doug Immel, had recently “tricked out” a 164 square foot house at the measly cost of $28,000. Doug lives near Providence, RI.
This idea falls in line with a point I have repeatedly made, mostly on my personal website ChrisGrande.com, that instead of merely focusing on the saving side of the equation when planning your financial freedom, one should also consider focusing on the cost side (see articles where I’ve discussed cost in retirement).
Why Focus on Costs?
Building a small retirement home, with all of the amenities that you desire is an excellent strategy. Especially for those who will not be retiring wealthy. As an example, I have had meetings with numerous retirees and pre-retirees whose financial situations average out to something like this:
- $0-300,000 saved
- social security of $1,000-2,000/mo
- may or may not own their home free and clear
The lower end of the above profile puts someone in a tough situation in retirement. Even the higher end, someone with ~$300,000 and a social security check, is not going to have too much flexibility in retirement. It’s often the cost of “existing:” home, utilities, insurances, and food – that take up most of the budget too.
So, do we recommend that they try for higher investment returns to make up for lack of income? Do we recommend saving more money now, right before retirement, and skimp on lifestyle so that people might have more at 65?
NO – I’d rather turn the problem on its head and recommend people consider lowering their cost profile. And since much of those “existing” expenses are related to a house, let’s reduce that cost footprint. Let’s let go of the idea that we need that big house.
Maybe Doug Immel’s 164 square foot house is too small for you. But the idea of downsizing – while reducing or eliminating a mortgage, cutting insurance costs, and utility bills (especially if you invest in alternatives), could go a long way to making you financially independent sooner.
And there’s no way to truly measure financial freedom – we can only merely appreciate it. And having financial freedom at a younger age is appealing to more and more people – AND THEY ARE DOING SOMETHING ABOUT IT!
If you want to do something about it, call us. We specialize in downsizing. We can help whether it’s with home downsizing or summarizing other cost reducing strategies.
888.278.9433 or email us here.