As we begin our real estate journey, and invest in a property, does the thought come to you: “how long I will be there?” As we look to buy our forever home our financial forecasting might not be at the forefront of our minds at the moment. But then, as you get older, you need to think about making changes to your life so you can get the most out of it. This is when your home could be a hindrance. But even when you are younger, your home can still be an obstacle to living a good life. And this is when you start to think about downsizing. But is downsizing an essential option or should we just stay where we are?
Is Your Home Suitable For Retirement?
When we’re buying our forever home, we need to think about if it will be suitable for us until our dying day. When we have a property that doesn’t seem particularly retirement friendly, it could be part of our estate, and we pass it on to our next of kin. But this is where can get tricky. Cost of living is rising, and if you are struggling to make ends meet now, but you have children, how do you think they will get by in life? We all want our children to have a comfortable existence, but this may very well result in us giving our children our home, and we move onto a retirement community. Although, on the other hand, there are plenty of granny flat designs that can make the best of this situation. A granny flat is a property that is added onto an existing home, and it’s great for older people looking to downsize or live a minimalist lifestyle. And if you find yourself in a predicament where not just you, but your children (and your grandchildren) need to start saving the pennies, it may very well mean that the home has to serve multiple uses.
Are You Running Into Debt?
Running into debt can stop us in our tracks. Sometimes downsizing appears to be a good option because we don’t have to pay as much on a mortgage. But if we decide to sell up so we can pay off a large amount of debt, downsizing comes with its pros and cons. Firstly, looking for any home in the modern financial climate means more than its fair share of difficulties. People make the big mistake that, just because they’ve been through the mortgage process once, that it becomes easier. In fact, you are subject to the same sort of checks as the first time you bought a property. If you are running into a lot of debt, and they are forever mounting due to interest, downsizing can work on the surface, but if you downsize to a smaller home purely so you can pay off debt, but it doesn’t suit your lifestyle, won’t you end up frustrated a few years down the line? It’s not just the financial aspect you need to consider, but it’s the practical ones as well.
What’s Your Investment Portfolio Like?
If you are someone that shudders with fear at the thought of investments and other complex financial terms, it doesn’t have to be this way. Your home is your investment, but it’s all about seeing how it fits in with your larger portfolio. This can include things like your car, but also if you have any intention of getting into stocks and shares. But going back to your property, if it’s a nice home, in an up-and-coming area, or isn’t too far from a school, these are all things that could very well make it a decent investment. For many of us, our home is our financial future, and if you want to diversify your portfolio, it’s important to get some knowledge under your belt before it’s too late. Because stocks and shares can seem incredibly complex, this puts people off getting into it. And it’s important that, if you are considering downsizing for financial reasons, will you be able to put some money into stocks and shares, or premium bonds, which can provide and additional income a few years down the line? In which case, is there any point in leaving your home? Diversifying your investment portfolio isn’t as complex as it sounds. It’s all about playing the long game.
What’s Your 30-Year Plan?
And if investments sound like a good idea, you have to start thinking about if they will form part of your future. Downsizing your property is a short-term solution if you’re looking for a cash injection. But financially speaking, we all suffer ups and downs. If you have a 30-year plan in mind, you will have a far more informed opinion of if you are able to weather this immediate financial storm. There may be financial struggles now, but if you think that selling your property is going to solve them, it may not prove to be as simple as that. Instead, if you have a 30-year plan in place, where you are able to track your expenditure, especially as you’ve already bought a home, you may very well fare better further down the line.
The Bottom Line
Downsizing your property or remaining where you are isn’t just about a cash injection, you’ve got to think about so many comprehensive factors. A lot of people consider downsizing for practicality reasons, but the reality doesn’t match the intention. Because it’s about your needs now as well as in the future, as well as the ever-changing financial markets, not to mention the fact that things may change, when you consider downsizing, it’s a difficult path to gain clarity in.
When people hit old age, downsizing appears to be a very logical step, because they’re not able to get around as much. Certainly, getting an immediate financial injection appears worthwhile, but if you end up downsizing to a small property for this reason alone it could have a detrimental impact on your life in other ways. You may very well end up renting for the rest of your life. If you have a property, and the thoughts turn to downsizing, ensure that you are going through every permutation.
