Thursday, April 8, 2010

Why We Are Downsizing Now

By tomorrow our house will be on the market. Fortunately we are in a good financial position with the house since we bought it nearly a decade ago (unlike many people we know who bought near the top of the housing bubble and are now wallowing in a negative financial position with their homes). Here's why we choose this particular point in time to make this move:
  • The $8000 home purchase tax credit will expire soon (at least it is supposed to but I theorize it may be extended so as not to totally implode the mostly stagnant housing market). This may be an incentive to get the contract signed around by the end of April and lead to a quick sale.
  • Home prices in our area have not fallen as low as in other parts of the country. People are still buying here and with people looking to buy, we figured now would be a good time to test the market and see if we can sell at a price we feel comfortable with.
  • We are not pressed to sell. We set a reasonable price for our home, yet it is towards the top of the market value. If it sells, it sells, and if not, we can always wait so we aren't approaching this in a reactive way but rather a proactive way.
  • We are getting older, the kids have moved out, and we entertain much less than we used to so instead of paying to buy/clean/furnish/maintain a large house, it seems to make more sense to live in a much smaller home and on the rare occasion we have a crowd, we can take everyone out to a restaurant or get hotel rooms for guests.
  • We plan to retire early. The spouse, since becoming unemployed, has decided not to go back to work. My business is relatively portable so I can basically work from anywhere. Now seems like a good time to, not exactly retire, but scale back our lifestyle dramatically and become more flexible financially.
  • We also plan to travel more. Since we aren't getting any younger, we figure we better enjoy globe trotting while we still have the health and stamina to enjoy it.
  • We want to set each other up for a good transition should something happen to one of us. I have seen it happen numerous times--one spouse dies and leaves the other with a large unmanageable house, debts, and tons of household "stuff" to deal with. By downsizing to a small house which will be a "home base" and paying cash for it, getting rid of extraneous junk that has been collected over the years, and ensuring that we have no debt (plus investments, insurance, and savings), should one of us die, the other will be in a much better position to deal with such a major change in their life.
  • I have less and less faith in the US economy. I'm not a math-a-magician so the whole current financial situation may make sense to those with more math skills than me, but I just don't see how social security will be able to cover the burgeoning number of Baby Boomers who are now, or will soon be, tapping into the financial spigot. Add to that the Obamacare insurance program that is going to cover everyone--and incur massive financial losses (I know they say people will pay for their insurance but if millions couldn't afford to pay before, I don't understand how they will be able to pay now...), along with the more than thirty state governments that are on the verge of bankruptcy...and I just don't see much financial solvency in America's future. This leads to less consumer confidence, less consumer purchases, dropping prices, related get the idea.
  • I feel the need to diversify my assets. Which I have done by investing a bit in foreign markets (land, businesses, currency). This may increase as we become more open to international options via travel and living in foreign countries for extended periods of time.
  • And the need to diversify my reliance on the American economy in general. Which means I don't want a large investment in US real estate in the hopes that the prices will eventually come up. I have never relied on only one source of income, and I don't see that changing, but by looking at other foreign options, and having the ability to take advantage of them, we may be able to have more diversified income streams as well.
  • I want to maximize my mostly US-earned income. Currently most of my income is earned in the US so with the dollar still OK compared to other currencies, we figure that before it totally nosedives, and by spending much more time in foreign countries where the cost of living is much lower, our money will stretch much further.
  • America seems to grow more socialist by the day. Yes, I realize that America is one of the best countries on earth, and yes I often have flashbacks of my grandfather having the same sentiments (forty plus years ago) so maybe it is just me or maybe it is just how people feel as they age and remember "the good old days", but being more location independent seems like a really good option at this point in time.
  • Whereas the '90s were the decade of extravagance and over consumption, these days it just feels right to go all minimalist. We are following suit. You really don't need a ton of stuff to be happy...and we aim to prove this to ourselves.

I actually have no idea how things will turn out for the US, financially or otherwise, so take these ideas with a grain of salt and due diligence study, however if you are looking for a change, consider going against the grain. Start by downsizing your stuff, downsizing your debts, diversifying both your income sources and your marketable skills, and, should you choose to, go even more "radical" by becoming location independent.


  1. Makes sense to get and stay on the "asset" side of the ledger in any economic climate.
    Since government appears to be doing all it can to destroy the dollar as the Papists in Congress try to buy their way into heaven with borrowed or other people's stolen/looted money, you can't be too careful.

  2. Code Name --

    Question for you. Do you see the "international" lifestyle as a truly viable option?

    I am 23, have completely location-independent income, and am not tied down to any location. The idea of making the world my office is appealing -- but it has disadvantages as well.

    You can't travel with an AR-15. You can't take preparations with me. I would hate to be in the U.S. if an economic meltdown occurred -- but I'd want to be in Asia or Latin America even less. Some people talk about "going international" as a way of increasing freedom. Do you agree, or not?

  3. Anon--It completely depends where you are at in your life and what you want to do. I think the "location independant thing" is a fad right now. A few will stick with it forever and most will try it then go back to their regular life in order to find a better fit.
    For us, it was important when the kids were young to have a solid home base, a garden, animals, family activities (camping, shooting, etc) which is why we were very settled at that point in our life. Now the kids have moved out and are literally all over the world with their jobs and families so staying put is not so much a necessity now.
    I think everyone should travel internationally just to see how things work in other countries and it may give you some future bug out options. Should TSHTF (hopefully slightly before) you will be able to make the choice of when and where to go. That being said, the US--and being firmly rooted here--is at this point still a very good option. During political unrest, being in a third world country is the place you least want to be. Carrying an AR-15 in said country will get you killed or in prison (where you will wish you were dead).
    The bottom line is to live minimally--no debt, no ton of consumer junk that you have to pack around like a sherpa--so that in an emergency you can go portable if necessary yet still have some assets that will work for barter/sale/to get the hell out of dodge. Good luck on the choices you will make!

  4. Thanks for the advice. I admit the "perpetual traveler" concept is very tempting.... but I think having a home base is the way to go. There are still so many freedoms we have here, that can't be taken with you overseas.

  5. CNI: Thanks. As usual thoughtful advice. Personally I don't think international travel experience is needed. One thing to be said about the U.S., is that it is the least likely place to run out of food. A condition that seems to be the major cause of government/ society breakdowns.

  6. International travel has a lot of challenges it is certainly not the lifestyle for everyone. I do, however, recommend that people travel internationally, especially to a third world country, at least once in their life so they will have a more well-rounded view of how the world really is as opposed to only getting iinformation from the TV news. It is hard to believe the media on a lot of things when you have actually experienced situations yourself first hand..