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How do you go about downsizing your life?
How to scale down your assets and responsibilities at the right time.
It’s natural to approach financial planning with a growth mindset. Most of us start our adult lives with lots of room for growth – earning less than we’d like to and not owning many assets. You can use financial planning over the short, medium and long term to change that. Gaining skills and experience to increase your income is part of it, but so are saving and investing to grow your wealth. Debt, used responsibly, can also help you to buy assets that improve your life and increase your net worth.
But life moves in cycles, and eternal growth isn’t practical. It probably isn’t even desirable – how many cars can you drive at once? How many homes are enough? When does your business get so big that owning and running it brings you more stress than joy? There may come a time when you decide you’d like less to worry about, less to manage and plan and keep secure, to improve your quality of life.
That’s why eventual downsizing should be part of your long-term life plan, even when you’re hustling through your growth phases.
Key reasons for downsizing
Your children have grown up and moved into homes of their own.
Your spouse has passed away, or you’ve been through a divorce.
Your income has dropped or stayed at the same level, while the costs of maintaining your lifestyle keep increasing.
You’re retiring, or you’ve decided you no longer want the stress of running your own business.
You’ve decided to live in a more environmentally conscious way, so you want to reduce your carbon footprint.
If one or more of these reasons apply to you, it’s time to think about downsizing.
It’s never too early to make downsizing at some point in the future part of your financial plan
Areas in which to consider downsizing
Your home
If you’re maintaining a large property with an extensive garden and more bedrooms than you need, consider selling it and moving into a smaller home. If you’re retiring or you can work remotely, you might even decide to move from a big city to a smaller town. They usually offer lower property prices and a cheaper cost of living, so you can maximise the nest egg you get from the sale of your former home.
Your car
The cost of fuel and maintenance may mean you’re already thinking about trading in your car for something more fuel-efficient and less expensive to run. If your children have grown up and moved out to start families of their own, your car doesn’t have to be ‘Mom’s taxi’ anymore, so you could make do with a smaller model with lower running costs. Either of these factors can make downsizing your car an attractive option.
Your assets
Dune buggies, boats and other recreational vehicles are life-enhancing when you’re an active family that enjoys outdoor breaks regularly. However, as your young ones leave the nest, or you get less active, you may find you’re not using them as often. Selling unused assets will free up cash to invest in your new life phase.
Similarly, running a successful business can be immensely fulfilling, but it is also a huge amount of work. You may want to sell up for a tidy profit, and hand over the reins to the next generation. That’s why exit planning is an important part of owning your own business.
Your lifestyle
Are you paying for subscriptions – to a gym, internet site or streaming service – that you never use? Do you eat out or grab takeaways too often because you couldn’t be bothered to cook? Does your family expect an overseas holiday every year? If you need to downsize because your current lifestyle has become unaffordable, cutting unnecessary costs ruthlessly is a great place to start. It’s a matter of focus and discipline.
You don’t have to give up every luxury, but the annual cost of a gym subscription, for example, could be enough to invest in the equipment you need to maintain a home fitness routine – whether you prefer a mountain bike, free weights or a treadmill. Learning to cook recipes you like, and sharing them with friends and family, will boost your social life and your wallet. It may even give you a new side hustle. And South Africa has thousands of vacation destinations to explore, with all kinds of landscape and climate, that cost way less than travelling internationally.
Just like a retirement investment or life insurance, the longer you plan and invest for a goal, the more money you will have to achieve it when the time comes. But even if you haven’t considered this option until now, it’s never too late to investigate the benefits of downsizing, either. Speak to a financial adviser about the assets you currently own, and where you can make changes to improve your quality of life.
