If you want to save more money, you need to seriously consider living in a smaller home – at least, if you are not yet doing so. There are so many benefits if you do this. In fact, this was one of the solutions that saved consumers from completely ruining their financial future. They sold off their big homes – or let it go to foreclosure. Once they were rid of the high mortgage payments, they moved into a smaller home. Some even went as far as living in tiny homes. These are homes that are literally tiny – some are only 84 square feet. There is also this one guy who created a mobile home that is small enough to be towed by a bicycle.
The people who decided to save more money by moving to a smaller home was right to do so. According to the study done by the Economic Policy Institute and published on EPI.org, the housing costs of the average American family can eat up as much as 20% of their monthly budget. If the average annual household income is $52,250, that means $10,450 is spent on housing costs alone. That is around $871 a month. Imagine if you can save this much money each month. You can save one million in 10 years. That is a big amount of money for retirement.
If you are buying a house, you may want to consider a smaller one because it will really help you save a lot of money – not just in your mortgage, but also your monthly utility bills.
How can you save with a smaller house?
Of course, moving to a smaller house will entail a couple of sacrifices. You need to give up a couple of possessions along the way. If you once lived in a 1,000 sqm house, do you really think you can fit all your stuff when you move into, let us say, a 300 sqm home? Of course not! You will not only sacrifice your possessions, you also have to let go of having all that extra space in the house. You may have to think twice about inviting friends over – because you only have so much space for everyone to move around.
There are a lot of sacrifices to be made when you downsize your home. However, there are a lot of people who gladly accepted these sacrifices if it meant they will be able to save more money in the long run.
Take for instance this family of four that is featured in this video. This family used to live in a big house and even owned a restaurant. Unfortunately, when the Great Recession hit the country, they were forced to give up all of that. What they did is to build a smaller home for the four of them. Watch the video to know more about what happened to them.
As you can see, the home they are currently living in is really small. But it is completely livable. The four of them (the couple and 2 kids) can fit perfectly in the house. What they did was to make do with what they have. They used their creativity in utilizing every space in their tiny house to make sure that the minimal possessions that they own is stored properly.
And the reward of doing all these sacrifices? It allowed them to cope with their financial losses and get rid of their debts. They were able to save and buy what they now own without going into debt.
Another family opted to save more money by living in a smaller home. Their exploits are published on TheBumbleshack and they revealed just how much they are saving after they moved into their new home.
To give a bit of a background, the couple were worried about all their expenses, ruined credit and the dismal $20,000 money that they had in their retirement fund. Their current expenses left them unable to add more to this fund. Obviously, $20,000 cannot sustain their retirement so what they did is to cash out that fund and build a tiny house. They rented a lot for $300 a month and that was where they parked their tiny house. With this move, they were able to save the following:
- On rent: $300 (from $1,400)
- On electricity: $75 ti $120 (from $250-$350)
- On water: $0 with a well (from $60)
- On lawn service: $0 (from $25)
- On pest control: $0 (from $360 annually)
- On Internet: $100 (from $120)
- On cable: $40 (from $0)
Because they lived in a smaller home, they are able to save more money – $1,650 to be exact. The expense that they were spending before was $2,210 a month. Now, with a smaller home, they are only spending $560. If you think that $1,650 is small amount, that will translate to $19,800 of savings a year. In 20 years, that can be $396,000 worth of savings in their retirement fund. If they can save up to buy their own land, they can save $300 more – which is $3,600 a year.
Living in a smaller house allowed this family to avoid the destructive household debt and save more money so the couple can have enough funds to retire on. They would never have been able to do this if they stayed in their big house.
How else can you save while living in a smaller home
According to an article published on TumbleWeedHouses, there are specific savings that you can get by choosing to let go of your bigger house. These savings include the following:
- No mortgage. Most of the time, tiny house owners get to own their house without borrowing a home loan. For those who need to borrow money, they can afford to loan as small amount. Usually, a loan for a tiny house will only cost you less than $400 a month.
- Low utility bills. Another benefit of living in a smaller house is you get to lower your monthly bills. As you can see from the list of savings mentioned earlier, the electric bill is smaller because the heating and cooling costs are lower. After all, it is easier to heat or cool a smaller house. Not only that, if you happen to live in a land that has a well in it, you do not have to pay anything on your water bill.
- Less shopping expense. This covers a lot of things. You do not have to buy a lot of furniture for your tiny house because you usually have to build them into the house. For instance, you can custom build your couch against the wall of the living area so you can fashion a storage space underneath. And since you do not have a lot of space, you usually do not have to buy a lot of things anyway. The same is true for your clothes, children’s toys and other possessions. You will think twice about buying them because you simply do not have the storage space for them.
There are so many ways that you can save more money if you only live in a smaller house. If you think about it, you do not really need to live in a big house. You only need a house that is big enough to allow you to have the basic things in life. You just need a kitchen, a bathroom, and a place to sleep, relax and eat your food. Any space that is beyond this is actually just an excess.