Downsizing – is it for you?
By Peter Kelly
Over the past six months, I have been receiving a lot of calls and emails from financial planners asking about the ability of people who sell their family home to contribute any additional sale proceeds to superannuation. This is the Government’s ‘downsizer contribution’ initiative that was introduced from 1 July 2018. Let’s explore the topic downsizing is it for you?
These enquires got me thinking – not so much about downsizer contributions to super and the myriad of rules that impact them – but on the general concept of ‘downsizing’. That is, moving to a smaller home.
I am a bit of a fan of the tiny house concept and probably spend far too much time watching videos about people who have built and are living in their own tiny house. There are even YouTube channels devoted specifically to this genre.
However, let me be quite clear. I can never see myself living in a tiny house per se. You know, something like a 18m2 (200 sq. ft.) ‘house’ built on a twin or even triple axle chassis. No, that is not for me.
But the idea of a ‘small’ house has some appeal to me.
To my mind, a small house is probably going to be somewhere between 100 to 150m2(1100 – 1600 sq. ft.). That is, it would have a full-size kitchen and bathroom a living room, two bedrooms and perhaps a study.
Over the past couple of decades, the size of the average Australian house has increased exponentially with the rise of the ‘suburban’ McMansion. Huge houses built on ever decreasing plots of land.
Large houses are a great idea when we have to house a growing family, but as we get a little older and the kids leave home, a big house can lose its attractiveness. Sure, we live in a familiar and often convenient neighbourhood, but the sheer size of houses many empty-nesters are living in is crippling.
They cost a lot more to maintain, insure, heat, cool and furnish. And they pay a toll on ageing hips, ankles and knees where stairs need to be navigated to get to the bedroom (I call climbing the stairs ‘exercise’!).
Unlike the Government that introduced a number of super related measures to help ease the housing crisis, I am not for advocating those of us who are a little older should be selling up and moving into a little shoe-box size house (on wheels!) somewhere. Rather some thought about moving to a smaller home at some stage is something that could occupy a little thought now and again.
To my way of thinking, modern retirement villages offer some of the benefits of a ‘small-house’ living. But they are not a perfect solution for everyone. I feel that the ownership structure of many retirement villages (the deferred management fee model) will be suitable for some, but not for everyone. Perhaps more community title type facilities that allow for freehold ownership, need to be developed.
Smaller House Benefits
A couple of the observations I have made as I pursue my recreational time watching the expanding tiny house movement on YouTube have included:
- The majority of us have accumulated an enormous amount of ‘stuff’ over the years – and we continue to do so. Our houses are full of things we haven’t used for years and, if the truth be known, are unlikely to be used again. And in many cases, we store things for our kids, because their own homes are not big enough to accommodate everything. We hold on to this stuff ‘just in case’.
- I have started to do some de-cluttering and finding a new ‘home’ for things that either don’t serve a purpose or add meaning to my life. It can be a very liberating exercise.
- Incidentally, when I say I am ‘finding a new home’ for my surplus things, that is not landfill! One man’s trash is another man’s treasure – so selling things, donating and recycling comes first. Landfill is a last resort.
- There are numerous YouTube hosts who tells us how to live meaningful lives with way less than what we currently have. And the good news is, we don’t have to become minimalists to achieve this (unless we really want to).
- Smaller can often cost us less. A smaller home is usually cheaper to buy and if it is efficiently designed, can save large amounts of money into the future with lower maintenance, insurance and utility costs. And by being smaller, it will cost a lot less to furnish. How many readers have a perfectly furnished formal lounge room that nobody ever uses?
- Living in a smaller home removes the burden associated with doing the regular jobs that need to be done – mowing lawns, vacuuming etc, thereby freeing up more time for more pleasurable pursuits.
The idea of downsizing will appeal to some readers. However, there are many who will want to stay firmly entrenched where they. Neither approach is wrong. At the end of the day it comes down to what works best for us as individuals.
We would welcome your thoughts on the topic of downsizing and living a life with less ‘stuff’. Please join the discussion by making a comment below.
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