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Downsize Your House; Further Your Budget

What would you do with an extra $100,000 sitting in your bank account? You read that right. That’s five zeros.

Take a quick look at your budget, and you’ll see plenty of places that extra money would do some powerful work. Maybe you could get rid of that Debt category for good and free up money for fun and the future. What a weight off that would be, right?

But how?

We have a radical solution—but we realize it’s a hard sell. Why? Because we’re suggesting downsizing.

Everyone knows the saying, “home is where the heart is.” But we also know a house is just a building. A home is about the people in it. And if the people in your house are ready to make the move (literally and figuratively) to financial peace, we’ve got the info you need.

Why would I downsize my house?

There are several reasons you might want or need to downsize. Let’s start by looking at the graphic below.

Budget Percentages for Your Home and Mortgage

When you set up your EveryDollar budget, you’ll see the above suggested budget categories; you can use the recommended budget percentages to get an idea of how much of your monthly budget these things should take up. Knowing this, let’s look at the first five things you might want to consider when it comes to downsizing.

1) You may want to downsize if your monthly mortgage pushes your housing category beyond 25–35%.

Get pencil to paper or fingers to calculator. Better yet, grab our free EveryDollar app where we do the math for you! When you plug in all your incomes and expenses, we create a color-coordinated circle chart to show you if those percentages are spot on or way off. If you see that housing category eating away most of your money, downsizing could be the best way to get your better-balanced budget.

2) If you don’t need that space anymore, it may be time to downsize your house.

Have those baby birds flown the nest? Are you tired of your weekend being lost to hours of landscaping? Or did you buy big only to realize you don’t like cleaning the two extra bedrooms, home theater, and all those toilets? Life or priority changes might mean it’s time to look for a smaller home, yard, or both.

3) You realize you can get a newer house if you go smaller. Have you ever added up what it would take to fully update your home? If you picked one project at a time and saved up the cash needed to renovate or redecorate, that could take a really long time. However, another option would be to sell your larger home and make the switch to a smaller, yet already updated, one.

This is how it’ll work: let’s say you sell your house (which increased in value as you lived there) and have that lovely $100,000 we mentioned earlier. That would make an incredible down payment on a new, less-expensive house!

We know this change could mean relocating to a different town. If the market is hot where you live but less hot one town over, a move might mean you can afford the dedicated laundry room, party-ready patio, granite countertops, and hardwood floors your homeowner dreams are made of.

4) You want to free up money to work the Baby Steps.

A lower monthly mortgage means more money in your budget each month. What would you do with it? Once you’re debt-free, you can launch into the next several Baby Steps. Save! Invest! Save! GIVE!

Listen—it’s always a good time to look ahead. Maybe you’ve been asked about your one-year or five-year plan, but we have to think beyond that. Get that fully-funded emergency fund in order, get 15% of your income going toward retirement, get those kids a college fund, and get that (downsized) house paid off. In the end, you’ll be living and giving like no one else because you decided that solid financial footing was more important than square footage.

5) You’re ready to kick debt to the curb, even if that means moving to a new house.

Now we’re getting serious. And some might even use the word “weird.” But we’re okay with that because we know what we’re working toward is worth being called weird. The goal is a debt-free life—owning instead of owing and living empowered instead of in panic.

How EveryDollar Budgeters Paid Down Debt by Downsizing

Remember that $100,000 in the bank we talked about before? It’s not just a random number. It’s the actual amount EveryDollar users Stephanie and Taylor had after selling their home to pay down their debt. They were living under the weight of $137,000 in debt (student loans, medical bills, and living expenses) and staring at decades of payments.

But then they realized debt freedom was within their reach—even if it meant a radical change. For this couple, downsizing their home meant dropping the title of homeowner. But with the $100,000 they kept after closing, they made a giant (more like a colossal, gargantuan, mammoth) payment. Talk about some intense, debt snowball momentum!

EveryDollar Budgeters on Rachel Cruze Show

“We were looking at 20–30 years before being debt-free, and now we should be totally debt-free within a couple years,” Taylor said.

We aren’t saying this was easy. They sold the house they’d brought their babies home to! In their interview with financial expert and best-selling author Rachel Cruze, they talked about how that felt.

“I had an emotional moment after we accepted the offer,” Stephanie explained. “But it was only a moment because I knew just what the ending would look like.”

Since they knew it was a good decision for their future, they were able to see past those first feelings of sadness. And when Rachel asked if it was worth it, Stephanie and Taylor both said without hesitation, “Absolutely. 100%.”

Maybe your debt isn’t that large. Maybe renting isn’t something you want to work into your equation. But however daunting downsizing may look, it’s a serious and speedy way to defeat debt and claim control of your financial future.

How do I downsize my house?

Though the idea of downsizing is hardly conventional, Taylor and Stephanie are living with hope and excitement for a future that once seemed overwhelming. And you can too.

When and if you decide downsizing is what’s best for you, your family, and your finances, you might not immediately feel complete composure. You’ll probably have questions like, How do I know what my house is worth? What kind of equity do I have built up? What does that mean in terms of me making this downsizing decision truly worth it? Or maybe even, What is equity? There’s no shame here, people!

We get it. This is a big decision, and your questions and fears are valid! Moving isn’t exactly what most people would call fun—and selling and buying isn’t what most people would call easy. But do we have some great news for you! There are people who do love all this stuff. And they’re called real estate agents. A good one guides you from the “maybe I’m ready to sell?” considerations to the “I just sold my house!” celebrations. We’ll help you find one.

When you work with one of our recommended real estate Endorsed Local Providers (ELPs), these experts in your area help you save money as you buy, sell, and navigate the fears and freedoms that come with downsizing.

Find a real estate expert in your area today.