As our children grow and flee the family nest, more Australians are making the move to smaller homes. It’s no surprise why, either, because downsizing definitely has its advantages. From financial to lifestyle the benefits are plentiful. These include:
- Freeing up extra cash (or reducing your mortgage) and giving you some financial liberty
- Access to a more manageable-sized home
- Freedom from maintaining extensive gardens and outdoor amenities
- Possible better access to local amenities
- Lower costs
- A life with less clutter
However, it’s also important to remember downsizing can have it challenges. If you take the time to create a solid plan and a clear foundation, you can enjoy a fulfilling and enjoyable lifestyle in your golden years.
In this guide, we will highlight potential difficulties that can arise when downsizing from a family home. Here are our top tips on how to plan for downsizing to get the most out of it.
Establish clear goals:
Like most other things in life, setting clear goals is key. Think about what you’re trying to achieve – ask yourself “why am I downsizing?”. Are you looking forward to travelling more and want a place to lock the door and leave without worry? Are you hoping for a more convenient location, closer to amenities? Are you a keen golfer and want to be a short distance to your favourite fairways? Or perhaps you are planning to free up some cash to follow your dreams?
As you can see, people have different reasons for downsizing and these reasons will affect the process. So, set your goals first.
Accept it will be an emotional time:
Emotionally, it is hard to farewell your family home. Most often, it’s where you raised your family, held countless celebrations and is brimming with memories. But try to stay focused on the goal. When you remember the reasons behind your decision, you can manage the emotions better. We recommend you:
- Get excited for the new home – positive emotions make everything more bearable.
- Stay busy – that way, there’s less time to overthink.
- Explore your new neighbourhood and start looking forward to your new local cafes, shops and amenities.
Planning the process:
Downsizing might sound simple, but you need to plan for several elements to achieve your goal:
- Research the real estate market to ensure you can sell for the amount you require (after deducting taxes and legal fees)
- Understand your financial obligations – an accountant or financial advisor can offer more clarity
- Know your budget for purchasing a new place and consider all costs associated with it
We won't go deep into the financial planning for downsizing since it can be different for everyone. Some people might tap into built-up equity to finance their new purchase and end up debt free, while others might refinance their current loan. You should discuss your options with your financial advisor or mortgage broker to see what is best for you.
It’s important to know there are government incentives designed for people in this situation. You can read further and apply for the grant “Downsizing contribution into superannuation” here. Make sure to ask your financial advisor or mortgage broker about all grants available to downsizers, too.
Finally, you need to plan the move. You need to consider what stays and what goes. Having a downsizing checklist can help you in the planning process. We prepared a checklist for you which you can download through this link. Remember, this is a starting point. You can always add to it and change it based on your individual circumstances.
Preparing for the move:
If you’ve lived in your current home for quite some time, you’ve no doubt amassed a lifetime of goods. Decluttering might take time, so it’s best to start it as soon as you can. Make a few separate inventory lists to help with the process, including:
- What to keep, like family heirlooms and items with sentimental value.
- Items you think a family member or a friend might be interested in. Let them know in advance and ask them to come and pick it up as early as possible.
- A list of things you want to donate to charities.
If you have children, ask them to collect what they like to keep. And don’t worry if you feel it’s too hard to let things go. Remind yourself an exciting new chapter in your life awaits and it’s an ideal opportunity to start fresh.