3 Signs You Should Downsize Your Home

Do you have too much square footage for your own good? Here's how to know.

Having a larger home can make life more pleasant. This especially holds true if you've been working remotely during the coronavirus pandemic.

But in some cases, hanging onto a larger home doesn't make a lot of sense. Here are a few scenarios where it really pays to consider downsizing.

1. You're spending too much on housing

As a general rule, your housing costs, including your mortgage payment, property taxes, and homeowners insurance, should not exceed 30% of your take-home pay.

Now, there's a little wiggle room with that formula depending on where you live. In larger cities, for example, it's often possible to get by without a car. That could lead to huge savings, making it easier to spend more on a home.

But for the most part, it's best to stick to that 30% limit. That way, you'll be less likely to fall behind on your mortgage, or on any other bills for that matter.

If you're currently spending more than 30% of your income on housing, then downsizing could be a smart move. The money you free up can not only go toward other bills, but also toward important goals, like padding your savings.

2. You have rooms in your home you don't use

It's one thing to hang onto a larger home because you truly need the space. But if there are extra bedrooms in your home that aren't being used, or you can't remember the last time anyone set foot in your den or family room, then it may be time to consider a smaller property.

Shedding square footage could not only result in lower housing costs, but also in less work for you. The less space you have to maintain, the less time you'll spend vacuuming, dusting, and taking care of your home.

3. Your utility bills are through the roof

It costs more money to heat and cool a larger home than a smaller one. Even if your housing costs aren't more than 30% of your income, if you spend hundreds of dollars each month on utility bills, that alone may be a good reason to lose some square footage. This especially applies if you really don't need the amount of space you currently have.

Is downsizing right for you?

If downsizing will significantly impact your quality of life in a negative manner, then you may want to find a way to stay in your larger home. That could mean boosting your income with a second job so you can swing higher housing costs and utility bills.

But if you can maintain a comfortable living situation with less square footage, and you can also pull off a move on the relative cheap, then it does pay to look at downsizing to a smaller space, assuming that doing so allows you to stay in your current neighborhood or a similar neighborhood that appeals to you.

Remember, too, that you can always downsize for a few years and then move to a larger home once your earnings increase or your family expands. But it definitely pays to look at downsizing if money is tight and you currently have more room in your home than you need.