Monday, October 5, 2015

52 Weeks to a Simpler Life – Tip #5 – Downsize Your Living Accommodations

This week Tip #5 is about where and how you live. Once again, the action required to fulfill this tip is not something that you can do instantly. It will require some serious contemplation, analysis and planning. Once you know, first, if you want to take this action and, second, what you want to actually do, you'll need to create a plan of action.

Contemplation, Consideration & Analysis

To get off “start,” the first thing you have to do is look around and contemplate or think what it would be like if you actually left your current home (this applies to a business, too), and moved to a smaller accommodation in a different location. There are numerous things to consider (the consideration part of this process) to take this action. Here are just a few:
  • How much less space could accommodate your actual living needs?
  • What will you have to eliminate from your current residence and lifestyle to fit your new simpler, downsized lifestyle?
  • Where would this new accommodation be located (in comparison to your current location)?
  • How would this impact your job or profession?
  • How would this impact access to friends and family?
  • Do you currently own or rent and would you change that status?
  • How much is it costing you monthly, annually for the overall overhead of your current accommodation and how much would you want to reduce it if you follow through with this step?
  • Are then any serious consequences you'd realize if you make this move?
I'm sure there are more considerations you can add to this list. They are based on your individual circumstances.

If you're single, with no dependents (children), this may be an easier process for you. If you're a single parent, there are certainly additional considerations involved. If you are married, with or without children, there are even more considerations to take into account. If you're very close knit with family or a group of friends, this brings other considerations into play.

Once you've done some contemplation on what a different, smaller and simpler accommodation might look like and then made the list of considerations that will come into play, you're ready to start doing the analysis. You should consider the analysis a “feasibility study.” You want to weigh all the considerations and determine the pros and cons of downsizing and simplifying your accommodations. If you're honest with yourself (and your spouse and children if they are part of this picture), it's almost inevitable you'll find the pros will outnumber the cons, often by a considerable margin.

Add in some intangible considerations like would a move from an urban or close in suburban location to an outlying suburb or even a rural, small town area improve not only your cost of living, but your quality of life? The reverse may also be a consideration. If you're already living in the outlying suburbs or a rural area, would living in, an apartment, in an urban environment be more accommodating and improve your quality of life?

In what ways, you may ask. Overall costs for urban living can be quite expensive due to the cost of real estate, taxes, higher utility costs, possibly higher insurance costs, cost of food and other necessities, entertainment costs and you can add any other facets of your lifestyle. A move to an outlying area may simplify your life and also reduce your overall cost of living. Additionally, most urban areas have somewhat higher crime rates, light and noise pollution, traffic and congestion. How important are these aspects of daily life to you and are they possibly causing stress in your life?

On the other hand, perhaps, living in an outlying suburban or rural area may be a more relaxed, generally safer lifestyle with lower crime, little or no light and noise pollution, lower taxes, rents, cost of living, utility costs, etc. But, family, friends and the job are all in the urban area and the cost is expensive in both time and financial outlay to commute for these facets of your life. You also may have yard work to do in the rural area and no yard work in the urban setting. What is the cost differential? You may also need two vehicles in the suburban/rural setting, but be able to get by with a single vehicle or possibly no vehicle at all if you lived in an urban setting.

What And Who Is Important To You?

There are no right or wrong answers to the questions you will be posing to yourself to apply this tip for living simpler to your life. The process is not about lowering your quality of life. In fact, it's all about improving your quality of life. The idea is to downsize into accommodations that will afford you less space to accumulate “stuff” you don't need (and you should be eliminating as you continue the process outlined in Tip #1). You'll live a more streamlined, efficient, lower cost and simpler lifestyle. The result should be to improve your overall quality of life.

Imagine if making such a downsize could lower your cost significantly. How much? Suppose, if you're single, you could consider leaving a job or profession you're not enjoying or have never enjoyed. You needed the income from the current job or profession to finance your current lifestyle. All of a sudden you don't need that much income. Perhaps, now you could do something you truly love and gain fulfillment from.

If you're married and have a family, suppose this downsizing and simplifying might result in one of the spouses giving up an undesirable job or profession. Perhaps, it might provide the opportunity to start a small family business that could be run from a small desk in the corner. Maybe, after a couple years, that business might replace the other spouse's need to work at a job or profession he or she doesn't find fulfilling? Would that change your lifestyle and quality of life?

All of these possibilities and as many more as you want to consider should be part of your analysis. Remember, it's your life. The only thing you owe your children, if you have any, is a comfortable, secure place to live, necessary and appropriate clothes, healthy food and your guidance to become productive adults and members of society. Of course, there should always be mutual respect. When they become adults, hopefully, the values you've lived by will have been imparted to them as they strike out on their own adventure in living.

To Rent Or To Own

This is always a major issue for people. We've been conditioned as part of our understanding of the, so-called, American Dream to want to own our homes. Let me state right here and right now, owning is not necessarily all that it's made out to be. Further, owning is not necessary or right for everyone.

If you currently own a home or condo of some kind, you may understand what I'm saying. There are numerous studies that indicate in the long run, for the average homeowner, you actually may not come out any further ahead than a renter. I'm not talking about those who specifically buy and sell houses for financial speculation. They are in the real estate business, even if they live in the home for a short time. Running a detailed spreadsheet and taking all facets and responsibilities of owning a home into account, renters may even come out ahead sometimes.

I had a manuscript presented to me by a very intelligent, savvy physician. He had been taken to the cleaners for about a million dollars by an investment manager he used. He was so angry he researched and wrote this manuscript. Unfortunately, he never went forward and published it. One chapter was about the American Dream of home ownership. In the chapter he detailed, based on facts he gathered, the detailed cost of owning a home over a 30 year mortgage. Essentially, it was virtually a wash with someone who rented for the same 30 years. He also showed how it got worse if someone bought and sold several homes over that 30 year period.

No! He didn't just take into account the interest on the loan. The interest typically doubled the original cost of the home or even tripled it depending on the interest rate. There is a lot more that goes into owning a home. You must consider taxes, insurance, repairs, upkeep, roof and other infrastructure replacements due to aging. Even capital improvements may not pan out in the end.

Of course, he pointed out the fact that the person with a mortgage doesn't actually own the home until the mortgage is paid off and the deed is signed over to the home buyer. If the buyer should go into default, the mortgage holder can foreclose on the house. But, even after the mortgage is paid off, the home owner is not completely free and clear. The home can still be taken away if the owner falls behind on real estate tax payments. This may also include if he or she refuses to pay for city, county or state special assessments of various kinds. And, if there should ever be a federal tax lien levied for unpaid income taxes, the home could be seized by the federal government and auctioned.

Don't forget keeping the lawn cut and the landscaping up, shoveling walks in the winter in snowy areas of the country. There is also keeping the house painted and in good repair inside and out. There may be some monetary commitment in these things, but how much is that priceless commodity or your time worth?

I know, I've made home owning seem like a big negative. My point is, owning a home is very often not a way of simplifying your life. It can add higher expense, take significant time and require the owners to generate more money to be able to stay in their home.

Even selling a home when the time comes, can become complex and require investing more money into the property to bring it to the standards of the current market or it won't sell easily, quickly or garner the price the seller believes they should get.

Renting has its own pros and cons. Depending on the kind of rental accommodation and arrangement it could be as simple as a single payment to cover everything including utilities, cable TV with only the exception of adding telephone and Internet. Or it could involve a monthly rent, gas, electric and, possibly, water/sewer utilities, telephone and Internet. The rental requirements vary. If the rental is a detached house, the renter may also be responsible for mowing the lawn and maintaining the landscaping. A side note: many people are opting out of having a landline telephone installed because they use their cell phones.

However, in most good, well negotiated rental agreements the property owner is responsible for all repairs, replacement of appliances that fail, damage from weather and making sure the property is clean, painted, carpeting and other interior amenities are in good condition when the renter moves in.

I've personally owned and rented properties. In my case and this is only my personal experience and opinion, the properties I owned were basically “money pits.” In other words, they continually cost me money month after month. The homes I rented afforded me the opportunity to live in places I probably would never have wanted to afford living if I had to buy and mortgage the properties. I lived on the shore of a private lake with my own dock. I lived on a mountain top with gorgeous views each of the four seasons of the year. I lived on a small ranch with horses, pastoral views and lots of nature and wildlife. That is mentioning only a few places. In the end, they all cost me considerably less than if I had to buy and own them.

One other facet about renting that, over the years, really sold me on renting. When I chose to move on, I cleaned the property so it was as clean or cleaner than when I moved in, moved my “stuff” out and was gone. It usually required 30 days notice at the end of a lease period. But, I didn't have to deal with real estate agents and people traipsing through my house and my stuff. I didn't have to keep my house looking like a “Better Homes & Gardens” showplace to entice prospective buyers to put a contract on the property. I didn't have to go through closings, etc. I simply decided to move . . . and moved.

The renting or owning question is an important consideration for you. And, you may even want to rent for a period to see if the move you are making is the right move. With renting, it's pretty easy to change your mind. With owning, it could cost you a lot of out of pocket money and may take longer to make the move.

Action Plan

The preceding processes are likely to take a fair amount of time. Unless you're in a rental arrangement currently and the lease term is ending in a fairly short time, you may not be able to make a snap decision and move next week or even next month. This is a lifestyle choice and as such requires serious contemplation, consideration and analysis. Once you've gone through this process it's time to formulate the action plan.

The action plan doesn't have to be complicated, although it will most likely be easier to implement and execute if you are a renter than if you're an owner.

The first thing to do is determine what kind of accommodation you want to move to. It is obviously going to be smaller than your current accommodation. That means you have to work at eliminating all the stuff the new accommodation will not have room to store. That goes back to Tip #1.

Next, you need to have determined where the new accommodations will be located. This will be done mainly through research, road trips or even air travel, if the planned new locale is some distance from your current place of residence. You'll want to meet people, learn about the infrastructure, requirements of becoming a resident in the new locale, explore shopping, schools (if they are a requirement), politics, medical community, entertainment and any other facets of a lifestyle in a new locale. Of course, you'll need to have made a decision as to whether you'll rent or buy.

Next, you'll have to find a place that meets your requirements and secure it to work within your time frame.

And, of course, you'll have to establish the time line for all of these elements to occur. Again, this will be much easier if you are going from a rental to another rental. If ownership is involved in either or both sides of this plan, the timing will become much more complicated.

The Mobile Lifestyle

There is, of course, one other possibility. Perhaps, like myself and millions of other people around the U.S. and the world, you may be ready to forego a fixed residential living accommodation for a mobile lifestyle. There are too many variables and possibilities to go into all of them here. But, let's just consider it could be a Class A, B or C motorhome, a converted van, box truck, shuttle bus, school bus or over the road long distance travel bus. You might opt for a travel trailer or a 5th wheel trailer.

You might also consider a number of other different mobile lifestyles including camping in a tent out of your car or SUV. You could travel in that car or SUV to various parts of the U.S. or world and rent small apartments, a room in someone's home or house sit for specific periods of time and then move on. And, of course, in all cases you have to take into account what will work for you, if you're single or if you're married. If you have kids, that adds another dimension to the picture.

The Bottom Line

Life can be very simple, full of adventure and provide a quality of life you never dreamed was possible. It can cost less to live well and have more free time to pursue the things you want to do instead of doing things you have to do. You get to be the decider and chooser. Another way of putting it is that you can live larger by living smaller. Downsizing and simplifying your accommodations, like anything else in life requires a process of contemplation, consideration and analysis. Tip #5 has given you an approach to accomplishing the process.


Richard Rosen said...

I have a career in the real estate industry for almost 40 years and can attest to your experience Ed about the actual cost of owning a home. We probably average $5,000/year just in maintenance on a 1800 square foot home in Florida. Incredible how something always needs repair or replacement. This doesn’t include lawn and pool care and other such items. I've come to recognize that you end up rebuilding a house every 20 years or so.

For my money, I’d rent, but Eve does not want to be at the mercy of a landlord selling the house. That security is a valid reason to own, but keep in mind that a house is a consumer item. You don’t expect to make money when you buy a car, but we’ve been conditioned to believe that real estate prices pretty much only go up––not true.

Great article Ed. Keep up the good work.

Ed Helvey - Location Independent Traveler said...

Thanks, for corroborating my point on owning real estate, Richard. As both a home owner and a real estate professional, I'm sure you have a real inside track on it. And, I know, especially in Florida, where the 2008 real estate crash really hit a lot of people hard, all they thought they had in that house went away and so many ended up owing more than they could sell their homes for.

Home ownership is not a bad thing and I'm not trying to make it a total negative. I think we're both saying, Buyer Beware. Everything about home ownership is not as it may seem or you may believe. Do lots of homework and research. Learn everything you can, especially about the pitfalls and true - "total" costs of owning a home, before you sign a contract and a mortgage agreement.