There has been a lot of talk about the benefits of going minimalist or downsizing, especially from now famous names like Marie Kondo. While there are certainly many benefits to adopting this lifestyle, one of the biggest is financial.
Here are four ways to downsize so you can repay your debts faster.
1. Move to a Smaller Living Space
When it comes to downsizing, the most literal form of this has to be moving to a smaller space. You probably chose to move into your current place for a reason. Maybe you felt like you needed the space. Or possibly you’ve just always thought having a larger place would be better.
The reality is that more space means more money. Whether you’re renting or paying off a mortgage, you’re going to pay a premium for more rooms. Unless you truly need every square inch of space, why not downsize and save some money?
There are some other compelling reasons to downsize your space as well. Oftentimes, people find they’re actually happier with less room because it’s less time-consuming to maintain.
2. Get Less Expensive, More Functional Items
For just about every product available today, you can choose from a wide selection of options. Each one is going to come with certain pros and cons. But just as importantly, there’s often a wide price variance between different choices.
Think about owning a car. There are nearly limitless choices when it comes to which vehicle you choose for yourself. That choice you make is going to have pretty vast financial impacts. Just because you can find a way to afford a luxury car doesn’t mean you need to get it. This is especially true if going for that option is going to put a strain on your holistic financial health.
When you need to downsize to pay down your debt, it’s important to think about functionality first. Yes, the luxury car has heated seats and a different hood ornament. But does it really do that much better of a job getting you from point A to point B? Likely not.
Once you start thinking about the functionality and efficiency of purchases about other elements, you can start saving money to put toward paying down your debt.
3. Seek Alternative Debt Payoff Plans
Downsizing to pay off debt isn’t just about items. It’s also about choosing the right path for helping you accomplish your goals. Creating a debt payoff plan is one of the first things you should do.
There’s lots of advice out there for what’s the best way to pay down your debt. Research has shown the snowball method is actually the most effective for helping people eliminate their credit card debt. With this approach, you pay off your lowest balances first, while making minimum payments on larger ones. The mental boost you get from eliminating those little debts propels you to additional wins.
Some people will consider using home equity to pay off debt. This can give people a chance to eliminate their higher interest debt with a consolidated loan that’s easier to pay back. But it’s also important to note that there’s an inherent risk in this because it puts your most valuable asset on the line. You can also consider using other forms of debt consolidation in order to repay your debts.
4. Sell Things You Don’t Use
Most of us have things we don’t really use enough to justify owning. Part ways with some of these items if you need to downsize to repay debt.
Selling through an online marketplace is one of the best options for this because you’re more likely to get offers close to the real value of the item. It’s also smart to not be too hasty in parting ways with your most prized possessions. It’s possible that someday you’ll wish you hadn’t gotten rid of them.
Debt is a tricky thing with which to deal. This is especially the case if you have a bit more of it than you should. Downsizing in a few areas of your life is one of the best ways to help eliminate some of that debt.