AssetBuilder - Registered Investment Advisor :: Simple Investing Smart Future

 If you've downsized from a large house to a smaller one, from a house to a condo, or changed from being an owner to being an editor, please share your experience here. I know people who have done it, and none regret it, but most people are very reluctant to change their shelter.

 Here's the recent column where I suggest to a family that it may be time to rethink their shelter. http://assetbuilder.com/blogs/scott_burns/archive/2008/04/16/stay-the-course-but-rethink-shelter.aspx

Scott

I retired four years ago and a few months later we began downsizing. Like most folks, we had accumulated a lot of stuff over the years, much of which we rarely used. The first thing we did was to offer most of it to each of our four adult kids. We included all those items that we knew they would want after we passed on, reasoning that there was no good reason for us to keep storing those things ourselves until we died. Unused jewelry, photographs, family heirlooms, etc., all found new homes with our kids, as did much of our furniture.  The word we used to describe how all this felt was "liberating!" We still feel that way.

About a year ago we sold our home and moved to an adult (age 55+) apartment complex that has many stores and services within a five minute drive. We considered buying a condo but decided that after a lifetime of home ownership, it was time to let someone else worry about things like maintenance and repair.  The proceeds from the sale of our home will cover our rent and utilities for several years, after which we'll go back to drawing from our IRAs.

We have less than half as much floor space here but it is more than adequate for our lifestyle.  We've gotten used to the idea that any time we buy something, we have to think about what we're going to get rid of. You can't accumulate a lot of stuff if there's nowhere to store it.

We love retirement, especially since moving to the apartment. It is such a relief not to worry about all of the usual homeowner issues that we've handled for most of our lives.

There's one other thing that we're quite pleased about: Because our possessions are fewer and there is no longer real estate to deal with, the settling of our estate when we pass on will be a relatively simple matter for those left behind. We don't intend to check out anytime soon, but there's comfort in knowing that we've done all we can to simplify the aftermath when it happens.

We downsized by 50% two years ago.  We sold excess stuff not needed and used proceeds towards purchase of a few new furniture items we desired.  Have not missed the space and very comfortable in smaller digs.  Went into a patio home that also included lawn care.  Very happy with the home but we'll close next week on another home in a much stronger HOA.  Current HOA is very weak and problems are continuing to weaken the area.  A 25' utility work trailer is parked across the street each day.  Lesson learned is when downsizing be very careful of the economics of the neighborhood and strength of HOA to maintain the area.

New house (built 2004) will be a small upsize of 10% and with regular size lot to allow some elbow room.  Downside I will be responsible for lawn care but will hire it out.  Utilities, taxes and insurance costs were reduced considerably from orginal home and savings will transfer to new house. Again we are going to rid ourselves of more STUFF.  If it hasn't been used during past two years it's gone.  We miss the lake front but not the additional expenses and have no regrets.  Money from orginal home allowed us to pay cash and put another 100K into retirement savings.

 We are planning to retire in 2-4 years with no revolving debt.  Both vehicles are or will be paid for and we have no other debts.  Used ESPlanner to calculate consumption smoothing along with Scott's current book and one by Zvie, to help lower risk but still maintain growth above inflation.  I must warn you that ESPlanner may advise you to spend more now and save less.  My bride saw that and really got excited.  Was able to convince her that we should still stay on track with current spending and savings since it still provides everything we need and most wants.

Botton line on downsizing, the rooms are smaller but we still have all the rooms.  We just don't have to pay for all the excess square footage we were not using.  What size is it?  It's 1504 sq. ft. and we really could go down more and be comfortable.  In 5-15 years I don't know who is going to purchase the McMansions we boomers built with the continuing tax and utility increases on top of higher inflation.  If it does become a problem as I suspect, that will just add icing to the cake for having downsized early.  If I'm going to a party I prefer arriving early rather than late.  It just seems to work out for us better.

I work for an oil company and the world has reached peak production.  Yes, their will be some large finds in the future but not enough to offset declining world production as consumption increases in places like China, Vietnam, India, etc. Countries with new found wealth who are trading bicycles for motor scooters or scooter to cars.  Prices will come down 20-40-50% if geopolitical events go to near zero or worse case if our economy sprials downward bringing the world economy with it.  If I was placing bets; geopolitical events will never disappear for long periods but will become more common.  Remember most oil is held by dictatorships.  I may be completely wrong and happily accept that if so.

My wife and I recently moved from our fairly large Dallas Lakewood house where we had lived for 23 years to a 1,419-sq. ft., 2-2 1/2 townhouse in Austin. I consider our downsizing successful in part because we can fit both cars in the garage.

Downsizing is a difficult process that involves a lot of work. However, the results are quite rewarding. We have found ourselves with much more time to do the things we enjoy because of far less time spent working around the house. Its been financially liberating as well due to a major reduction in our debt.

The process took us nearly a year. Before even putting the Dallas house on the market, we held a garage sale to get rid of the "first layer of stuff." That made the house look less crowded and easier to sell.

Because we had already purchased and furnished the Austin townhouse, once we had a firm contract and closing date on the Dallas house, we held an estate sale to sell as many of the furnishings in the Dallas house as possible. It turns out there are professionals who can help with holding a sale. We used one and I highly recommend doing so. They help with pricing, scheduling and advertising as well as giving much helpful advice. Hiring a professional was money well spent.

While preparing for the sale was work, holding it turned out to be a lot of fun. We met some very interesting, fun and unusual people. Also, a lot of friends came by as well as neighbors who said they just wanted to see the inside of our house.

Actually, before we held the estate sale, I sold my large, high end, collector quality audio gear because it would not fit into our townhouse. I used www.audiogon.com to get a good price and avoid the scams that are all too common on ebay. The equipment was sold within 72 hours. I’m sure there are other specialty web sites to help sell other valuable but rather unusual items.Not everything (by any means) sold at our estate sale. The remaining large items (furniture and appliances) I immediately listed on www.craigslist.com. Using craigslist is free and almost of the items sold within 48 hours. I recommend using a digital camera to add photos to your ads.

There was still a handful of furniture items left. I placed them with a consignment store. The remaining household items (all small by this time) we donated to a charity which gave us a tax deduction. We used a charity recommended by our estate sale consultant that came to the house and picked everything up.

My wife and I are empty nesters who recently retired. Retirement wouldn’t have been practical without downsizing. Our townhouse is in a gated community so we can just lock the door when we want to travel without worrying about security or maintenance.

The most difficult part of downsizing is just getting rid of stuff. I’m a pack rat by nature and had to challenge and force myself to let go of many things. However, I’m finding out I don’t miss them after all. In fact, its much easier to keep a small place clean and we feel very cozy.

I did use my perseverance and creativity to develop storage solutions for the things we decided to keep, mostly in our garage. Living in a smaller space has required us to be better organized – not a bad thing at all. I built some custom shelving but also purchased storage items at Home Depot, Lowe’s and Target. They have some very useful and reasonably priced storage products.

The results are rewarding. Because we downsized, we now lead a less stressful lifestyle that is psychologically and financially more secure.

 

In 2000, we returned to Texas from a job transfer that took us out of state.  We bought a beautiful new luxury home on the golf course in the suburbs.  We had a fixed rate mortgage at a good rate, but the tax rate for the school district was one of the highest in the state.  Three years later, my company began restructuring and sending jobs “offshore” and we began re-thinking our 2 income required house payment.  Although we felt I could replace my job quickly, we didn’t want to dive into our retirement saving in case I couldn’t.  We decided to “down-size” to a smaller and older home on the other side of town in a less attractive school district. Since we don’t have children, we were able to able to take advantage of the low prices in the neighborhood.  Since we were willing to move into an older home that needed paint and flooring, we were able to reduce our total house payment (PITI) by 65%. 

 We took a little loss when we did, but are so glad that we made the move.  It took 9 months to sell that home 4 years ago. I don’t even want to think how long it would take today, if we could sell it at all. We are now paying our 30 year fixed mortgage off on a 15 year term so that we will have no payment by the time we reach 56.  Although we hope to both still be employed by then, if something happens to one of our jobs, we won’t have to dip into our retirement.  Yes, we have an older home, but we have a classic floor plan with an extra large lot.  We lost about 30% of our square footage and went from a 3 car garage to 2, but haven’t really suffered from the smaller space.  We’ve organized our storage space for maximum usage. Yes, my oven is over 35 years old and is harvest gold, but it still works. When it breaks, we will get a nice stainless steel one. Not exactly the dream kitchen that I once had, but that’s really the only tradeoff.

We didn’t just downsize. We moved to a different state of mind where financial security is more important than “things” and being described as frugal is a badge of honor.

I hope everyone thinking about retirement will take the time to read these stories. They're just what I was hoping for--- real people giving real (and intelligent) details on what they did, how they did it, and what the benefits have been.

Financial planning isn't just about saving and investments. It's about the choices we make. And each of those choices often means a reduced need for saving and investing.

Just as majorberry found, ESPlanner software often suggests HIGHER spending, not lower spending. For some, it will be essential. But for others, spending less is just improving the margin of safety. If you're curious about this software, visit www.esplanner.com.

Stay tuned. More of these stories are coming.

Scott

Thank you for this useful information. I had been thinking that eBay would be a good place for us to start ridding ourselves of extraneous possessions but have never used it before. Would you please tell me what potential scams you are referring to?

Without more detail, I cannot concisely respond to the earlier comment regarding "scams that are all too common on eBay”.

My many hundreds of experiences on eBay have generally been quite positive.  As a rule, you have much more exposure to scams as a buyer than as a seller.  Your biggest exposure as a seller is not being paid, or receiving poor feedback that inhibits your ability to sell effectively. 

If you are nervous about getting started with selling on eBay, you can look up a number of "Trading Assistants" in your immediate area under eBay search. They will help you list and sell your items, usually for a percentage of the final sales price.

The best rule is to NEVER leave negative feedback, and only leave positive feedback AFTER you have gotten positive feedback from the other party.  To minimize any potential problems, set up a PayPal account (PayPal is owned by eBay) and then accept payment only through PayPal "Verified" members.  One note of caution: Never open any mail that finds its way into your junk mail folder purporting to be from PayPal.  PayPal NEVER asks you for ANY personal information in an official PayPal e-mail.  Always go directly to the PayPal site, log in and check for any problems.   There is a setting in your eBay Seller Account section where you set payment requirements, can screen out potential bidders with poor feedback or other ongoing problems.

 

 Here is the route I would suggest for gradually paring down your possessions while getting the most value for your items. 

 

 1. Use eBay as your first choice for your small to medium SIZED items.  It is important to be able to easily and affordably ship items you sell.  Use several high quality pictures with each listing.  On eBay, pictures sell.  You will usually get the most value for your item by selling it on eBay. You will normally get the highest return or value on eBay.

 

 2. Next, use the local Craigslist for larger items that require pickup.  Be careful about providing personal information in the AD, or letting people into your home.  I usually make the sale in the garage.  I suggest using many high quality digital pictures in the listing, as they are free.

 

 3. Use yard sales, garage sales, rummage sales and the like for the items of lesser value, bulky items like furniture or items that you simply want to get rid of and "Free Cycle.”  Hold a yard sale in the spring and another one in the fall each year.  There is normally no need to advertise if you live in an area with lots of traffic and use good, LARGE, bright and easily readable signs directing people to your sale.  

 

4. Next use Tax Deductible Donations: Donate to a worthy cause of your choice, but make sure you get a receipt.  Personally, I take digital photos of every item donated and then enter each item into the "Its Deductible" program within Turbo Tax.  This invariably leads to taking a higher deduction than if you guessed the fair market values yourself.  Its Deductible uses eBay's sales figures for millions of sales of like items to arrive at a fair market value for the donate item that is accepted by the IRS.  

 

5. Throw out the rest without hesitation or remorse! 

 

Scott,My wife and I downsized seven years ago and our experience was all positive. We originally lived in the Chicago, Illinois suburbs and were in pretty good financial shape – on our second house, a little money in the bank, good prospects. In 1991 my job was eliminated and I took a transfer to Dallas, TX to work in the corporate office. We sold our Illinois house and had a chunk of money to invest in Dallas. At that time they were just emerging from their financial “bust” of the late 80s and you could get a lot of house for your money. We went the custom built, all brick, ostentatiously large, swimming pooled, McMansion route like just about everyone else who moved in at that time. It was our dream house, but we overbuilt and spent too much. The realities of insuring, maintaining, and paying the taxes on that pile hit home after the first six months. Original thoughts of our income rising to meet our lifestyle did not pan out and we grew to resent what we had done to ourselves. Unlike back in Illinois, housing values rose very slowly in Texas back then. We were getting older, not saving much, carrying a credit card balance that never got smaller. Finally in 2000 we decided we had to change. We did quite a bit of research and wound up signing a contract for a new house 1000 square feet smaller than ours and listing the “Estate” for sale the same day. We were fortunate that a good real estate market let us sell for our asking price very quickly and we were able to move to our smaller abode by November 2000. With profit from the sale we paid off all our credit cards, bought a sensible new car for cash, and our increased cash flow allowed us to start saving and investing. This downsizing combined with some inherited funds has positioned us with about $750,000 in diversified investments and about $250,000 in cash accounts at age 59. In addition to the financial positives from downsizing, we emerged far happier and more positive about all aspects of our lives, which hopefully helped us live more healthy lives than the bitter and haunted people we used to be. I have said it to my wife many times, buying that big house was the dumbest thing we ever did and downsizing was the smartest thing we ever did. Of course, I do kind of miss that big three-car garage …..