Category Archives: Small-House Living

A Tale of Two Downsizers

By Claire Posted in Debt-Free, downsizing, Personal, Simpler Living, Small-House Living Tagged , , , , , ,

It is far, far better to willingly downsize your life than to lose everything and to be forced into doing so. I’ve lived the first situation, and have witnessed the second, so I feel that I speak with some authority on this subject.

Someone close to me had a very high income for much of their adult life. I’m talking several hundred thousand dollars annually. Occasionally they would lose their job, which is common in their industry, but they would quickly find another, often at a higher rate of pay, which was also common in their industry.

And so during the 80s and 90s, and for several years after the turn of the century, they lived very well indeed. With houses in two of the five most expensive housing markets in the country, plus land in Hawaii that was going to become the site of their vacation home, they were riding high. There were cruises, expensive cars, designer clothes and shoes, gorgeous furniture….they were living the life they always desired.

Then came a job loss that was not followed by a new job. By then, they were well into their 40s, and soon discovered that getting hired was no longer a sure thing. Before long, one house had to be sold, and then another. The land in Hawaii was sold for a third of its market value. The cars were sold, too, as was the furniture, once a rental townhome became the best possible housing option. But the credit card debt was insurmountable, so bankruptcy ensued.

But they would not give up on getting the dream back again. Even though they own nothing now, they’ve been renting a small place in one of the extremely expensive cities where they once owned a home. They’re working two jobs, and barely surviving. Their sole car is leased, with one year to go. Some of their credit cards are maxed out already; they also owe money to a couple of generous friends and relatives.

I’m very worried about this person, but they laugh off my concerns, even after all they’ve been through. (I could not live with the stress of their lifestyle, and I no longer have the energy to work two jobs, if I ever did.) And with retirement looming around the corner for both of us, I can’t imagine what they’re going to do if they don’t hit it big again (an unlikely event), given their addiction to a pricey lifestyle.

I am grateful for my simple, small house, my paid-off old cars, and having no debts. I don’t know where my husband and I would be today if we hadn’t willingly downsized our lives 11 years ago. I sure wish the person I’ve described here would have done what we did.

(Learn how we and others have proactively downsized our lives in my book, Downsizing Your Life for Freedom, Flexibility and Financial Peace.)

 

What Do You Spend Each Month?

By Claire Posted in Debt-Free, downsizing, Retirement, Simpler Living, Small-House Living Tagged , , , , , ,

You can’t determine what affordable housing means for you until you know how much money you have, and how much money you spend. We’ve previously looked at the first; now let’s figure out the second.

Whether you use an expenses app on your phone, or write down every dollar you spend in a small notebook, get in the habit of tracking your expenses. Do this for three months straight. This will give you a pretty good idea of what you spend, and where you spend it.

You’ll need to group your expenses into categories. I use my own categories when I do this (I’ve done it for almost my entire adult life). They include:

  • House payment or rent
  • Utilities
  • Property tax
  • Charity
  • Health-sharing ministry
  • Food
  • Car Insurance
  • Car expenses
  • Car gas
  • Medical/dental
  • Disability insurance
  • Life insurance
  • House insurance
  • Miscellaneous
  • Entertainment (includes dining out)
  • Gifts/cards
  • Yard/house
  • Clothes
  • Cell phone
  • His hobbies
  • Her hobbies

Many of these expenses are the same every month, so it’s not that hard to do this on a monthly basis. Just total these expenses, and any others you might have that I don’t have on this list; that total is an important number.

The big question is: how big is that number compared to your total monthly take-home pay? Do you spend more than you earn each month? If you do, something must be done. You need to be financially solvent going into your later years if you don’t want to end up living in your car someday.

If you’re spending more than you earn, I assume you have credit card debt. You’re going to need to get rid of that. If you have a spending addiction, you’re going to have to get help for that. If you live like someone who earns far more than you actually do, you need counseling to find out why you do that.

In addition to those issues, look at the individual categories to see where you can pare down. The largest categories are ripe for that, but the smaller categories add up, too. Be honest with yourself; where can you cut back so you can start spending less than you earn?

If you already spend less than you earn, congratulations! You’re one big step ahead of many people. Now you need to look at where you want to live before and in retirement, and whether you can afford it.

 

How to Avoid Living in Your Car

By Claire Posted in Debt-Free, downsizing, Simpler Living, Small-House Living Tagged , , , , ,

Over the past ten years or so, our country has seen an increase in homeless families. Some now live in their cars, even in traditionally affluent areas like Seattle. Avoiding this by being proactive is especially important if you’re not young anymore; younger people will (hopefully) have opportunities to bounce back in the future.

The only way to NOT end up living in your car (or worse, in a homeless shelter) is to secure affordable housing as soon as possible.

The first step is finding an affordable place to live (see last week’s post). There are many options for affordable housing. Renting may be OK if you can find a place where you’re pretty certain the rent won’t go up a lot. Living with someone else, like a friend or relative, with whom you can split costs is an excellent idea if you currently live alone.

The ideal is buying a small house with cash, something all on one level that can take you from your current age into old age without forcing you to move. Small houses have smaller-than-average utility bills, maintenance bills and property tax bills, so buying a small house is a good way to invest in your future retirement, helping you stay financially solvent even though you may not have a lot of retirement income coming in.

If you’re middle-age or approaching retirement age, dealing with long-term underemployment, or all of the above, you need to know how much money you have and how much money you spend each month so you can determine how much you can afford for housing. See the next post for details.

 

It’s OK to Give Up Birthday and Christmas Gifts

By Claire Posted in Clutter, downsizing, My Books, Simpler Living, Small-House Living Tagged , , , , , , ,

Often, after a birthday, or the holidays, we’re left with more goodies than we really need. That’s why we need to go through the gifts we received, deciding which are keepers and which need to be moved along, so we can remain clutter-free, or at least somewhat clutter-free.

Of course, some gifts are absolute keepers: the scarf your daughter knitted for you, a book you’ve been wanting to read, a bottle of your favorite wine. But what of those gifts of a more generic variety? Items like:

  • A shower kit with a cheap plastic “loofa” and bubble-gum scented shower gel,
  • A box of cheese and sausage snacks from someone who isn’t close enough to you to know you’re vegetarian, or
  • A sweater (with no gift receipt or tags) in a color combo that hasn’t been popular since the 1980s.

These gifts are easy to pass along to someone who you know will want them, or to simply donate to a thrift store or charity that takes items to resell. Make the time to do that now, rather than move them around for the next few months before you finally become fed up and do something with them.

Then there are the wonderful gifts which replace something you already owned. For instance, someone once gave me a lovely pair of woolen slippers. They were sturdy, practical and quite expensive, I later learned. So why did it take me months to start wearing them and to throw out my old, ratty slippers? Emotional attachment is the best explanation, I suppose. But I tripped over the box containing the new pair for ages before I finally made myself do the trade and pitch the old pair.

Duplicate gifts are a bit easier to deal with. If you received two of something, and it’s not consumable, share one with someone else you know who might need it, or pass it along. Why try to make space for it when you already have one?

As you go through your gifts and decide which are keepers and which need to go, let the momentum that builds up carry you along so that you take anything else you happen to see that’s no longer useful to you and move it along, too. You’ll be surprised how that momentum works.

If you need help making the tough decisions about which gifts to keep and which gifts to get rid of, see my book, The Sentimental Person’s Guide to Decluttering for tips on moving along a variety of gifts, including heirlooms and expensive gifts.