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Posted by on Jul 3, 2014 in ETF Strategist

Downsizing = Empowerment

Downsizing = Empowerment

By Roger Nusbaum AdvisorShares ETF Strategist

A couple of interesting comments came in on my post about people having different ideas about how/when/if to retire, one on the randomroger version of the post and one on the Seeking Alpha version.

On the randomroger version a reader in questioning the right dollar amount to accumulate added or is it $700,000 with no debt a small home, part-time job, and serious amounts of time with your family. I take this comment to be about lifestyle over wealth and possibly financial simplicity over financial complexity.

On the Seeking Alpha version a reader shared that he is unsure whether he will get to where he feels he needs to be financially to retire the way he wants so he said he is considering alternative strategies including downsizing.

With the right planning, downsizing no longer has to mean an ugly one-bedroom condo someplace that no one wants want to live working some part time job no one wants to work in driving an unreliable vehicle. Done with some thought and real planning, downsizing can be very empowering.

First housing. Lately I’ve been writing about something called Tiny Houses. You can start learning here but there are of plenty resources on the web for this. In past I have referred to these as trailers with high end finishes both inside and out but that description probably is not fair as they can be stunning and very cheap.

Using an example from a past blog post; a couple around retirement age with $300,000 accumulated for retirement with a mortgage free house worth $200,000 who downsize into a tiny house for $40,000 will likely have dramatically changed their financial situation (finding a spot for their tiny house may cost a few bucks too). In that scenario utilities could also be downsized; a cell phone package that includes a huge data plan could supplant the need for a landline (look into Smart 911 to overcome the emergency concerns of not having a landline) and TV package and heating a 200 square foot tiny house would be much cheaper than heating a regular sized home. Ditto electricity.

As far as the job no one wants, we’ve gone over things like hobby monetization, interesting seasonal opportunities and the like a couple of hundred times. My wife just started a business with her parents who are retirement aged. My in-laws have been garage salers for decades and have a genuine knack for getting stuff cheap and are now interested in starting to sell down the inventory so they rent a booth at a place in Prescott. My wife does the merchandising in the store and has started a Facebook page for their venture and it already has 84 likes. The revenue is small at this point but would more than cover a big fat data plan as mentioned above.

Personally I am not opposed to buying brand new cars but I do believe in driving them a long time. I tend to think it is worth having a reliable car. That doesn’t mean an expensive car but if you buy a Toyota and keep up with the maintenance you should be able to get at least ten reliable years out of it if not 15 years.

Downsizing as I envision it is not about desperation but empowerment (repeated for emphasis). A 200 square foot tiny will clearly not the solution for a large percentage of people but there is a serious need for people to downsize and that need will be met in increasingly interesting and appealing ways. This may be a positive consequence of the financial crisis stock market woes from a few years ago. I also recently mentioned somewhere that the old Biography Channel (266 on Directv) was changing to the FYI Channel in July and one of the shows is Tiny House Nation and the first episodes are July 9th.

Smart downsizing, so the context here is serious planning, can be a total game changer for an iffy portfolio size wise. A $20,000 paycheck kicking off from a $500,000 portfolio when combined with Social Security and a modest income from a well-planned job can be a more than sufficient plan B and makes the reader comment about $700,000 with no debt and a small home look very wealthy.

With serious planning can come the desired result or desired retirement lifestyle which is what makes this empowering. If you are doing the things you want to do without constantly fretting about money and enjoy where you live are you not empowered?