Should You Downsize? Here's How to Decide

When you’re deciding whether to downsize, you need to do a gut check — honestly evaluate your situation and your mindset. Your situation may be that all your children have moved out and you have far more home than you need; or your expenses are rising and you’re afraid of running out of money before the grim reaper pays a visit; or you’re bored and you want to finally pursue your dream of joining Cirque du Soleil.

You need to evaluate where you are and where you want to be when you’re deciding whether to downsize.

Likewise, you need to look inside yourself to get a sense of what you really think and feel about downsizing. What’s your vision for the next 10 to 20 years of your life? What will you be giving up? What do you expect to get in return? Are you looking forward with confidence and excitement or fear and trepidation?

If you don’t have a solid plan that you’re fairly certain will make you happier, you run the risk of being disappointed and getting discouraged, so take some time to analyze both your situation and your mindset.

Examining your situation

• Is your situation such that you have no choice but to downsize? For some people, downsizing isn’t a choice. Financial strain, health conditions, or pressure from family members may compel you to downsize, regardless of whether you want to.

Even if you’re being compelled to downsize by forces outside your control, taking the initiative and being proactive can give you more control over the outcome. Don’t just throw up your hands in despair; be an active participant as much as you’re able.

• Are you leading the life you want to live? If you feel as though you’re a victim of circumstance or you’re living passively and simply reacting to decisions that other people make, you may want to downsize to start living your life with intention — living your dream instead of enabling others to live theirs. Sometimes, having a big house and lots of possessions can be like wearing a ball and chain.
• Are you lonely? You may be able to improve your social life by downsizing and moving to a community where you’re more likely to meet compatible individuals — for example, an over-55 community with lots of social activities. (In Rochester Hills, we don’t call them senior centers; we call them OPCs — older people’s centers!)
• Is your home too much for you to clean and maintain? If your home is falling into disrepair, or your housekeeping is starting to slip and you can’t afford to hire out the work, it can be a sign that you’re ready to downsize.
• Are you burning through your savings? Ideally, you want to die without a penny in savings, meaning you enjoyed your money while you lived. But perhaps you want to leave some money behind for your survivors. Whatever the case, examine your finances carefully to make sure you’re not burning through your savings too quickly. If you are, downsizing may be the solution.
• Do you have more house than you need? If you have rooms that you never use, you may be a good candidate for downsizing. Or you can lease those rooms to generate additional income.
• Do you need to unlock the equity in your home to finance your dreams? If you have significant equity in your home (you can sell it for much more than you owe on it), you may want to sell your home to cash out your chips and use the proceeds to support the lifestyle you envision for yourself. Of course, other options are available for unlocking the equity in your home, such as refinancing or opening a home equity line of credit (HELOC).
• If you were to die today, would you leave a total mess for your loved ones to deal with? Do you care? Many people downsize to ease the burden on their loved ones, in which case moving to a more manageable home, shedding possessions, and organizing documents become top priorities. However, if you’ve already done a fantastic job of organizing everything and living simply, downsizing may be unnecessary.
• Do you need assistance with medical or personal care? If your health is declining or you simply need a little more help than in the past, downsizing can be an opportunity to move into housing where you can get the help you need.
• Are you and your partner on the same page? If you have a partner and one of you wants to downsize while the other doesn’t, that can be a deal breaker.